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HDG – Supporting factors from policy movements

• In 1Q24, as the El Nino has negatively affected to the hydrological conditions and the Central region (where hydroelectric plants are located) entered the dry season, HDG continued to record a less positive business result, with revenue to reach VND 848bn (USD 34.6mn, -11% YoY) and NPAT of parent company to decrease to VND 221bn (or USD 9mn, -27% YoY).
• For 2024, we expect the mild recovery in key businesses, especially from 3Q24, with the probability of El Nino will decrease and being replaced by a Neutral/La Nina phase, supporting hydropower plants’s output. As a result, we estimate HDG's total revenue to reach VND 2,800bn (USD 114mn, -3%YoY) and the gross profit of VND 1,806bn (USD 73.7mn, +5%YoY), also with 2024 NPAT-MI of VND 786bn (+10%YoY, USD 32mn, equivalent to 2024 bussiness plan). The 2024 equivalent EPS is VND 2,570.
• We are aware that HDG’s projects have legal issues, with: 1/ Real estate projects in the HCMC depend on the program of implementing commercial housing projects by obtaining land use rights with other land (the land origin in the project is mostly non-residential land), 2/ Transitional renewable energy projects are waiting for a new pricing framework to have an accurate estimation of the project's profitability. With the expectation that the Government will step up to resolve these issues in 2024, we expect HDG projects to be able to restart in 2025 - the basis for determining their value in the valuation model.
• HDG is the notable company for the long-term portfolio, with: 1/ Power plant portfolio and high potential land fund, 2/ Legal completion (for real estate projects) or new pricing framework (for transitional renewable energy projects) are supporting factors for the business revaluation in the period 2024-2025. Using the SoTP (Sum-of-the-parts) method, we maintain the target price of VND30,900/share (Upside +16%, including cash dividend of VND500/share), equivalent to an ACCUMULATE recommendation for Hado Group Jsc.