Long-term drivers for VCG

However, VCG faces risks such as fluctuations in construction material prices and changes in public investment policies.

Launchpad from a Low Profit Base

VCG reported revenue of VND 2,675 billion, a 12.3% year-over-year rise, and post-tax profit (PAT) of VND 147 billion, more than five times greater than the low base in 2023, according to the company's consolidated Q3/2024 business results. In contrast, VCG's independent financial reports revealed a PAT of VND 48 billion for the third quarter of 2024—a VND 15 billion drop from the same time the previous year.

The debt-to-total-assets ratio in annual financial statements has dropped, and the USD's depreciation in Q3 alleviated exchange rate pressures, lowering interest costs and boosting profit margins, which in turn led to positive profit growth. However, compared to the prior year, a lesser reversal of receivables provisions resulted in a lower profit in the separate financial statements. In contrast to Q3 2023, when the company avoided losses by reversing bad debt provisions by VND 290 billion, Q3 2024 saw a 5% decrease in short-term receivables (to over VND 6 trillion) and fewer reversals, indicating better debt management.

While PAT's revenue for the first nine months of 2024 was VND 766 billion, 3.7 times higher than it was for the same period in 2023, VCG's revenue was VND 8,139 billion, an 8.7% year-over-year decline. The corporation reversed the trend of high revenue but low profits from the previous year by achieving 54% of its revenue objective and 81% of its profit target for 2024.

Construction and Real Estate Prospects

Package 4.7 (worth VND 6,300 billion) and Package 4.8 (worth over VND 11,000 billion) under the Long Thanh International Airport project were among the significant contracts given to VCG-led consortiums in Q3. Taking advantage of the push for public investment disbursement, VCG has also landed contracts for important national projects including the Long Thanh Airport and the North-South Expressway.

According to Agriseco, "construction is expected to remain the primary revenue driver and growth engine for VCG in upcoming quarters due to abundant work volumes and the potential to win large projects during 2024–2026."

Plans to speed up both short- and long-term infrastructure projects would also serve as a "lever" for VCG, according to Vietcap analysts. VCG has been one of the few contractors selected for important infrastructure projects for the last three years. According to Vietcap, VCG is in a good position to take on more contracts in phases two and three of the Long Thanh International Airport project or in Vietnam's infrastructure development plan for 2021–2030.

VCG is also expected to benefit from its involvement in residential projects as the real estate market rebounds. VCG's real estate segment boasts a 2,000-hectare land bank, most of which is under development, promising future revenue streams.

Importantly, by the end of Q3, VCG's total liabilities had decreased by more than 10%, and it had paid off VND 1,600 billion in bonds through aggressive buybacks. Prior to this, the company was heavily indebted to loans and bonds for project financing (such as issuing trillions of VND in bonds for the Cat Ba Amatina project).

VCG's position in the real estate market is further strengthened by its industrial real estate holdings, which include at least three industrial parks in Hoa Lac, Dong Anh, and Son Tay. These parks' upgraded infrastructure is expected to provide substantial revenue potential and high occupancy rates beginning in 2025.

Financial Investments and Risks

Over the previous six years, VCG's financial investments have produced consistent yearly income of VND 1.9–2 trillion. Vietcap ascribed this to VCG's emphasis on sectors of basic products and services, like education and energy, which have steady demand and are less impacted by changes in the economy. Therefore, it is anticipated that financial investment activities will continue to contribute to the company's steady profits and won't undergo any major adjustments in the near future.

In general, risks that may significantly impact VCG's operations and profits include public investment promotion policies (linked to project progress and payment capabilities) and the real estate market's recovery level. Microrisks affecting core activities include construction material price fluctuations, which can increase input costs and reduce profit margins.

The industry average (P/E: 20; P/B: 1.3x) and the five-year average for VCG stock (P/E: 19.8x; P/B: 1.8x) are both much higher than VCG's P/E ratio of 13x and P/B ratio of 1.3x. A 10% increase over the current market price, or VND 19,500 per share, is the goal price that Agriseco suggests.