• For 9M 2024, GEX recorded revenue of VND23.6tn (+8% YoY), reported NPAT-MI of VND1.1tn (+2x YoY), and core NPAT-MI of VND484bn (+4% YoY), completing 75%/92%/103% of our respective full-year forecasts. The 9M blended GPM was 18.4%, 1.7 ppts ahead of our 2024F forecast, mainly driven by the stronger-than-expected GPM expansion/recovery from the electrical equipment and construction material segments. We attribute the doubled YoY reported NPAT-MI mainly to a VND996bn investment gain from GEX’s renewable power portfolio divestment in Q2. We expect GEX to generate ~VND150bn PBT gain from its Song Bung 4A hydropower divestment in Q4.
• Q3 2024 revenue was VND8.7tn (+16% YoY) and reported NPAT-MI was VND99bn (-19% YoY). Increased revenue was driven by 39% YoY growth from electrical equipment, which outweighed an 8% YoY decline from construction materials and a 50% decrease from utilities (mainly due to divestment of the power portfolio in Q2). The blended GPM has improved QoQ since Q4 2023, rising 80 bps to 19.0%. This increase has mainly been driven by a surge in IP leasing & services, which rose from 45.7% in Q2 to 71.5% in Q3, due to the handover of old IPs with low capex/ha while ASP increased. As a result, core NPAT-MI increased to VND183bn (+55% YoY). In contrast, we attribute the divergence between the top line and bottom line to (1) an 89% YoY plunge in gains from securities investments, and (2) a 45% YoY hike in minority interest, which together outweigh a 25% YoY reduction in financial expenses. 
• We see slight upside potential to our 2024 reported NPAT-MI forecast, mainly due to stronger-than-projected GPM expansion from electrical equipment as well as its robust top line to outweigh VGC’s weaker-than-expected performance, pending a fuller review. 
• We currently have an OUTPERFORM rating for GEX with a target price of VND24,400/share.

VGC: Lower-than-expected IP land handovers and rising minority interest cause the 2024 earnings forecast to fall short of our expectations

• For 9M 2024, VGC recorded revenue of VND8.2tn (-20% YoY) and reported NPAT-MI of VND569bn (-53% YoY), completing 70%/61% of our respective full-year forecasts. We attribute the dip in earnings to (1) a 1% decline in blended GPM to 28% (vs 29% in 9M 2023), primarily driven by (1) 5% lower GPM from the construction materials segment to 11%, (2) 7% higher G&A expenses, (3) 4x losses from its joint-venture (JV) companies, and (4) 6x higher minorities interest. VGC delivered 85 ha of handovers in 9M, trailing our full-year forecast of 152 ha, mainly due to the overall sector’s delay in leasing demand (partially due to the global minimum tax that came into effect in January 2024 and the uncertainty of the US election result). Conversely, we have observed that the GPM from the construction materials segment has continued to improve QoQ since hitting its lowest point in Q4 2023.
• VGC announced Q3 2024 revenue of VND2.8tn (-18% YoY) and reported NPAT-MI of VND205bn (-50% YoY).  We attribute the stronger decline in earnings vs revenue to (1) 16% higher G&A expenses and (2) higher losses from JV companies (VND37bn vs VND6bn in Q3 2023), while the blended GPM remained unchanged at 31%.  VGC recorded 30 ha (+2x QoQ) of land sale handovers from tier-2 IPs (Yen My, Dong Van 4, Dong Mai, and Phu Ha) vs tier-1 IPs in Q2, with an ASP of USD86/ha (-41% QoQ). Additionally, VGC recognized the COGS reduction for IPs in Q3 following the actual lower spending vs its projection previously, partially driving IP leasing & services’ GPM to surge to 65% (vs 46% in Q2).   
• Overall, 9M NPAT-MI completes 61% of our full-year forecast. We see downside risks to our 2024F earnings forecast due to the lower-than-expected IP land handovers and higher-than-expected minorities interest, pending a fuller review.

GEX’s Q3 & 9M 2024 results

Source: GEX, Vietcap, (*) Adjusted for one-off items and goodwill amortization expenses.

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