ELC_BUY_Update 3rd quarter business results

VALUATION

BSC maintains BUY recommendation for ELC with a new target price for 2022 of VND 33,100 per share (upside 16% compared to the price of November 1, 2021) based on PE/FCFF methods and real estate valuation.

FORECAST OF BUSINESS RESULTS

In 2021, BSC expects revenue and profit after tax of ELC to reach 888 billion (+10.8% YoY) and 48 billion (+53.9% YoY). EPS 2021 reaches VND 881, P/E fw 2021 reaches 32.3.

In 2022, BSC expects revenue and profit after tax of ELC to reach 1.506 billion (+69.5% YoY) and 78 billion (+62.0% YoY). EPS 2022 reaches VND 1,427, P/E fw 2022 reaches 19.9.

BSC estimates the net worth of the project at 18 Nguyen Chi Thanh is 260 billion.

INVESTMENT THESIS

·         ELC, the second market share in the Smart Transportation niche, expects strong business growth in the next two year as the Government focusing on smart transportation investment for road infrastructure.

·         ELC is building an office complex at 18 Nguyen Chi Thanh  

RISKS

Provision/Slow Collection  

Depend on investment policy, disbursement progress of government and business

BUSINESS UPDATES

Third quarter business results of 2021 grew strongly thanks to strong revenue growth and reversing provision. Revenue and profit after tax in the third quarter reached 210 billion (+128% YoY) and 13 billion (+125% YoY), equivalent to completing 55% of the revenue plan and 82% of the profit plan after 3 quarters.

Gross margin plummeted from 28% to 9%. BSC believed that the gross margin decreased due to the high rate of COGS during the period.