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REE – Hydropower segment’s results exceed our expectations in Q3 as hydropower cycle returns

• In Q3/2024, REE achieved revenue of VND 2,029bn (USD 80mn; +3% YoY; -7% QoQ) and NPAT-MI of VND 480bn (USD 19mn; -8% YoY; +34% QoQ), mainly driven by the recovery of its core power segment (which accounted for 40% of revenue and 80% of NPAT-MI). Other segments’ results remained flat.
• As the most challenging period for REE has passed, we forecast that the company’s NPAT-MI to continue recovering in Q4 due to (1) higher contributions from the real estate segment and (2) hydropower cycle returnsd, with REE’s peak typically in Q3 and notably Q4. For FY2024, we forecast revenue of VND 7,992bn (USD 317mn; -7% YoY) and NPAT-MI of VND 1,911bn (USD 76mn; -13% YoY). Looking forward to 2025, we expect REE’s growth to resume as (1) hydropower output recovers with the La Niña cycle and (2) the occupancy rate of the Etown 6 building increases.
• Based on the SoTP method, we set a 12-month target share price for REE at VND 71,700, corresponding to a forward P/E of 16.5x and an expected return of 17%, based on the closing price as of November 5, 2024.