May 9, 2023

[Vietnam] Construction

Coteccons Construction JSC Hold

(CTD VN) (Update)

Fundamentals remain solid Target price:

VND57,274
Upside: (-1.1%)

Mirae Asset Securities (Vietnam) JSC

Lam Tran, lam.td@miraeasset.com.vn

FY22 earnings results Coteccons Construction JSC (CTD) reported FY22 revenue of VND14,537bn, a hefty increase
over FY21 (+60% YoY), due to the low–base effect of last year. Gross margin improved by 30
bps, from 3.0% to 3.3%, as building material costs have eased since mid-year. Operating
earnings, however, contradict the impressive growth, as CTD reported a loss of VND54bn, due
to significant amounts of provisioning in receivables and held–for–trading securities. Despite
the operating loss, the company managed to avoid a loss in net profit, thanks to extraordinary
income from reversal of expenses and warranty provisioning of VND83bn.

FY23 forecast & valuation Outlook:

▪ Accumulated backlog of VND17,000bn by end-2022 lays the foundation for revenue

growth.

▪ Repeat sales strategy: The company is focused on current clients with solid financial
situations and payment capabilities.

Risk:

▪ Provisioning for receivables & held–for–trading securities are moderate.

▪ For FY23, we forecast revenue and NPAT of the parent at VND16,717bn (15% YoY) and
VND250bn (+1,104% YoY), respectively, with EPS at VND3,364 (+1,101% YoY)

Valuation

▪ We update our report for CTD with a Buy rating and target price of VND57,274, based on
the DCF valuation method. By shifting its strategy towards a concentrated portfolio of
clients with sound financial capabilities, CTD’s cash flow has been significantly improved,
which has a positive impact on valuation.

Key data
Share price (May/9/2023, VND) 57,900 Market cap (VND bn) 4,276
(%) - nde CTD
1 NP (23E, VND bn) 250 Shares outstanding (mn) 74
1 Consensus NP (23E, VND bn) n/a Free float (%) 66.1
11
EPS growth (23E, %) 1,101 Foreign ownership (%) 49.1
P/E (23E, x) 17,0 Beta (12M) 1.6
Market P/E (23E, x) 12.4 52-week low (VND) 23,450
a l ep ov an ar a VN-Index 1,054 52-week high (VND) 78,700

Share performance Earnings and valuation metrics

(%) 1M 6M 12M FY 2020H 2021H 2022H 2023F 2024F 2025F
Absolute 22.2 85.6 16.3 Revenue (VND bn) 14,558 9,078 14,537 16,717 19,225 21,148
Relative 23.6 74.3 33.3 Gross profit (VND bn) 856 275 487 669 961 1,163
Gross profit margin 5.9% 3.0% 3.3% 4.0% 5.0% 5.5%
NP (VND bn) 335 24 21 250 525 649
EPS (VND) 4,164 323 280 3,364 7,054 8,724
ROE (%) 3.8% 0.3% 0.3% 3.0% 6.0% 7.0%
P/E (x) 18.7 339.0 163.8x 17.0x 8.1x 6.6x
P/B (x) 0.7 1.0 0.4x 0.5x 0.5x 0.4x
Source: Company data, Mirae Asset Vietnam Research
PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES & DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT.
May 9, 2023 Coteccons Construction JSC

FY22 earnings results

FY22 earnings results

Coteccons Construction JSC (CTD) reported FY22 revenue of VND14,537bn, a hefty

increase over FY21 (+60% YoY), due to the low–base effect of last year. Gross margin
improved by 30 bps, from 3.0% to 3.3%, as building material costs have eased since mid-
year. Operating earnings, however, contradict the impressive growth, as CTD reported
a loss of VND54bn, due to significant amounts of provisioning in receivables and held–
for–trading securities. Despite the operating loss, the company managed to avoid a loss
in net profit, thanks to extraordinary income from reversal of expenses and warranty
provisioning of VND83bn.

By end-FY22, CTD won projects worth ~VND25,000bn (approximate of US$1bn), of which

the backlog for FY23 is VND17,000bn. Table 1 below shows some notable projects won
in 4Q22:

Table 1: Projects won in 4Q22

No Project Developer

1 Bai Trao (Commercial Villa) Sun Group

2 Hiive Binh Duong Tan Thien Khanh Investment Co., Ltd

3 Vinhomes Grand Park VHM

4 Apache 2 Apache Shoes Vietnam Co., Ltd

5 Riverapoint – Phase 1C Keppel Land & Tan Truong Co., Ltd

6 Hyaytt Regency Ho Tram Ho Viet Capital JSC

7 Van Lang Skylake Tu Lap Construction Co., Ltd

8 Lego The Lego Group

Source: Company data, Mirae Asset Vietnam Research

FY23 forecast & valuation

Outlook

Despite the strong momentum achieved in 4Q22, we expect CTD to see moderate
revenue growth of 15% and a recovery in net profit in 2023, although challenges lie
ahead. Our expectations are based on the following:

▪ The accumulated backlog of VND17,000bn at end-2022 lays the foundation for

revenue growth. In addition, backlogs are mostly calculated by fast–track
projects, which generate more sustainable revenue growth and enjoy lower
costs and risks than other conventional projects (MOU). Due to the complexity
of this method, however, it requires a highly capable contractor to conduct.

▪ Repeat sales strategy: The company is focused on current clients with solid

Mirae Asset Vietnam Research 2

May 9, 2023 Coteccons Construction JSC

financial situations and payment capabilities, thereby reducing risk and

boosting revenue growth (e.g., Apache Shoes Vietnam, KN Group, Vingroup,
and Hoa Phat Group).

Risk

▪ Provisioning for receivables: After reporting record–high provisioning of

VND388bn in 2022, we expect the company to report a moderate amount from
2023 to 2025, with a proportion of around 0.5%–1% of revenue per annum.

▪ Provisioning for held–for–trading securities: Unless a bear market reoccurs in

2023, we expect no provisioning to be reported for this category in 2023.

▪ As CTD operates in a cyclical industry with a high beta, the share price will be
heavily affected by any market turbulence.

Valuation

▪ For FY23, we forecast revenue and NPAT of the parent at VND16,717bn (15%
YoY) and VND250bn (-1,104% YoY), respectively, with EPS at VND3,364 (-1,101%).

▪ Gross margin is expected to improve and return to normal levels (from 3.3% to
4.0%), thanks to a significant decline in building material prices and the
compan ’s well–managed expenses.

▪ We update our report for CTD with a Buy rating and target price of VND57,274,
based on the DCF valuation method. By shifting its strategy towards a
concentrated portfolio of clients with so nd financial capabilities, CTD’s cash
flow has been significantly improved, which has a positive impact on valuation.

Table 2: Free cash flow to the firm (VNDbn)

2022H 2023F 2024F 2025F

NOPAT (147) 147 354 474

+ Depreciation 106 104 106 106

+ Provision 520 97 115 128

- Capex (193) (132) (85) (57)

Current assets 14,622 13,808 15,463 14,836

Current liabilities 9,676 9,525 10,358 9,113

Working capital 4,946 4,284 5,105 5,724

Net change in WC (1,158) 662 (821) (619)

Unlevered Free Cash Flow (871) 879 (332) 32

Discounted factor - 0.9 0.8 0.6

Present value of FCF - 801 (251) 20

Source: Company data, Mirae Asset Vietnam Research

Mirae Asset Vietnam Research 3

May 9, 2023 Coteccons Construction JSC

Table 3: Cost of capital

Risk-free rate 6.0%

Expected return 15.0%

Risk premium 9.0%

Beta (b) 1.84

Cost of equity 22.6%

Interest rate 12.4%

Effective tax rate 20.0%

Debt to total capitalization 16%

Equity to total capitalization 84%

WACC 20.5%

Source: Mirae Asset Vietnam Research

Table 4: Valuation by DCF method (VNDbn)

Terminal year EBITDA (2025E) 826 Enterprise value 1,606

EV/EBITDA 2.0x Less: total debt 1,648

Terminal value (2025E) 1,652 Less: preferred stock 0

Present value of TV 1,036 Less: Non-controlling interest 1

% of enterprise value 65% Plus: Cash & ST investment 4,305

Present value of CF 570 Implied equity value 4,262

% of enterprise value 35% Shares outstanding 74,414,258

Enterprise Value 1,606 Implied share price (VND/Share) 57,274

Source: Mirae Asset Vietnam Research

Mirae Asset Vietnam Research 4

May 9, 2023 Coteccons Construction JSC

Coteccons Construction JSC

Income statement (Summarized) Balance Sheet (Summarized))

(VNDbn) 2022H 2023F 2024F 2025F (VNDbn) 2022H 2023F 2024F 2025F
Revenue 14,537 16,717 19,225 21,148 Current Assets 17,465 18,113 20,001 19,631
Cost of Sales 14,050 16,049 18,264 19,985 Cash & Equivalents 1,064 2,656 3,019 3,406
Gross Profit 487 669 961 1,163 ST investment 1,778 1,649 1,519 1,389
Finance Income 381 244 370 390 Short term receivables 10,927 9,618 11,061 10,719
Interest expense 163 116 156 171 Other short-term receivables 1,358 2,290 2,107 1,738
SG&A 735 485 519 571 Provision (1,049) (1,166) (1,301) (1,449)
Operating Profit (54) 313 656 812 Inventories 2,838 2,550 3,002 3,176
Other Profit 88 - - - Other current assets 549 516 594 653
Pretax Profit 35 313 656 812 Non-current Assets 1,502 1,530 1,509 1,460
Income Tax 14 63 131 162 Long term receivables 403 403 403 403
Net Profit 21 250 525 649 Fixed assets 560 588 567 518
Controlling Interests 21 250 525 649 Other long-term assets 539 539 539 539
Non-Controlling Interests - - - - Liabilities 10,753 11,173 12,514 11,447
EBITDA 443 385 663 826 Short term payables to suppliers 5,189 4,837 5,254 4,928
FCFF (871) 879 (332) 32 Short-term advances from 2,121 2,748 2,897 2,318
customers
EBITDA Margin (%) 3.0% 2.3% 3.4% 3.9% Short term accrued expenses 2,022 1,539 1,751 1,369
Operating Profit Margin (%) -0.4% 1.9% 3.4% 3.8% Other short-term payables 342 399 454 496
Net Profit Margin (%) 0.1% 1.5% 2.7% 3.1% Total debts 1,077 1,648 2,156 2,334
Equity 8,214 8,470 8,995 9,644
Charter capital 788 794 794 794
Share premium 3,019 3,019 3,019 3,019
Treasury shares (598) (598) (598) (598)
I&D Fund 4,667 4,667 4,667 4,667
Retained earnings 336 586 1,111 1,761
Total Assets 18,967 19,643 21,509 21,091

Cash Flows (Summarized) Forecasts/Valuations (Summarized)

(VNDbn) 2022H 2023F 2024F 2025F 2022H 2023F 2024F 2025F
EBT 35 313 656 812 P/E (x) 163.8x 17.0x 8.1x 6.6x
Dep & Amor 106 104 106 106 P/B (x) 0.4x 0.5x 0.5x 0.4x
Provision 520 97 115 128 EPS (VND/share) 280 3,364 7,054 8,724
Profit from investing activities (352) (244) (370) (390) BVPS (VND/share) 110,382 113,820 120,874 129,598
Interest expense 79 136 176 191 Revenue Growth (%) 60.1% 15.0% 15.0% 10.0%
Changes in operating assets and 388 405 683 846 EBITDA Growth (%) -36% -13.0% 72.2% 24.6%
liabilities
Changes in receivables (3,343) 409 (1,337) 652 Gross profit growth (%) 77% 37.4% 43.8% 21.0%
Changes in inventories (1,188) 288 (452) (173) EPS Growth (%) -13% 1101.3% 109.7% 23.7%
Changes in payables 2,860 (151) 834 (1,245) DSO (days) 240 210 210 185
Changes in Held for Trading securities (249) - - - DIO (days) 59 58 60 58
Interest paid (56) (136) (176) (191) DPO (days) 110 110 105 90
Corporate income tax paid (35) (63) (131) (162) ROE (%) 0.3% 3.0% 6.0% 7.0%
Changes in other operating items (4) - - - ROA (%) 0.1% 1.3% 2.6% 3.0%
Net cash generated by operating (1,627) 753 (580) (274) 0.2% 2.4% 4.5% 5.5%
ROIC (%)
activities (CFO)
Net Capex (193) (132) (85) (57) Debt/Total Assets (%) 6% 8% 10% 11%
Net (payment)/collection from banks 951 150 150 150 Debt/Equity (%) 13% 19% 24% 24%
Net investment in other entities (341) - - - Interest coverage ratio (x) -1.1x 1.6x 2.8x 3.5x
Interest and dividends received 317 244 370 390 Debt service coverage (x) 0.1x 0.4x 0.6x 0.7x
Net cash generated by investing 733 262 435 483
activities (CFI)
Issuance of share/Shares buyback - 6 - -
Net debt issuance/(repayment) 1,074 571 508 178
Dividend paid - - - -
Net cash generated by financing 1,073 577 508 178
activities (CFF)
Changes in cash & equivalents 180 1,591 363 387
Beginning cash 885 1,064 2,656 3,019
Ending cash 1,064 2,656 3,019 3,406
Source: Company data, Mirae Asset Vietnam Research forecasts

Mirae Asset Vietnam Research 5

May 9, 2023 Coteccons Construction JSC

Appendix 1

Important disclosures and disclaimers

Two-year rating and TP history
Company (Code) Date Rating Target Price ( D) CTD 1 target price
Coteccons Construction JSC (CTD VN Equity) May 9, 2023 Hold 57,274 ,

Coteccons Construction JSC (CTD VN Equity) Dec 13, 2022 Non-rated N/A ,
,
Coteccons Construction JSC (CTD VN Equity) Sep 23, 2022 Buy 88,300
,
,
,
,
1 ,

a l ep ov an ar a

Stock ratings Sector ratings

Buy Expected 12-month performance: +20% or greater Overweight Expected to outperform the market over 12 months
Trading Buy Expected 12-month performance: +10% to +20% Neutral Expected to perform in line with the market over 12 months
Hold Expected 12-month performance: -10% to +10% Underweight Expected to underperform the market over 12 months
Sell Expected 12-month performance: -10% or worse

Rating and TP history: Share price (─), TP (▬), Not Rated (■), Buy (▲), Trading Buy (■), Hold (●), Sell (◆)
* Our investment rating is a guide to the expected return of the stock over the next 12 months.
* Outside of the official ratings of Mirae Asset Daewoo Co., Ltd., analysts may call trading opportunities should technical or short-term material developments arise.
* The TP was determined by the research analyst through valuation methods discussed in this report, in part based on estimates of future earnings.
* TP achievement may be impeded by risks related to the subject securities and companies, as well as general market and economic conditions.

Analyst certification
The research anal sts who prepared this report (the “Anal sts”) are s bject to ietnamese securities regulations. They are neither registered as research
analysts in any other jurisdiction nor subject to the laws and regulations thereof. Opinions expressed in this publication about the subject securities and
companies accurately reflect the personal views of the Analysts primarily responsible for this report. MAS policy prohibits its Analysts and members of their
ho seholds from owning sec rities of an compan in the Anal st’s area of coverage, and the Anal sts do not serve as an officer, director or advisory board
member of the subject companies. Except as otherwise specified herein, the Analysts have not received any compensation or any other benefits from the
subject companies in the past 12 months and have not been promised the same in connection with this report. No part of the compensation of the Analysts
was, is, or will be directly or indirectly related to the specific recommendations or views contained in this report but, like all employees of MAS, the Analysts
receive compensation that is determined by overall firm profitability, which includes revenues from, among other business units, the institutional equities,
investment banking, proprietary trading and private client division. At the time of publication of this report, the Analysts do not know or have reason to know
of any actual, material conflict of interest of the Analyst or MAS except as otherwise stated herein.
Disclaimers
This report is published by Mirae Asset Securities (Vietnam) JSC(MAS), a broker-dealer registered in the Socialist Republic of Vietnam and a member of the
Vietnam Stock Exchanges. Information and opinions contained herein have been compiled in good faith and from sources believed to be reliable, but such
information has not been independently verified and MAS makes no guarantee, representation or warranty, express or implied, as to the fairness, accuracy,
completeness or correctness of the information and opinions contained herein or of any translation into English from the Vietnamese language. In case of
an English translation of a report prepared in the Vietnamese language, the original Vietnamese language report may have been made available to investors
in advance of this report.
The intended recipients of this report are sophisticated institutional investors who have substantial knowledge of the local business environment, its common
practices, laws and accounting principles and no person whose receipt or use of this report would violate any laws and regulations or subject MAS and its
affiliates to registration or licensing requirements in any jurisdiction shall receive or make any use hereof.
This report is for general information purposes only and it is not and shall not be construed as an offer or a solicitation of an offer to effect transactions in
any securities or other financial instruments. The report does not constitute investment advice to any person and such person shall not be treated as a client
of MAS by virtue of receiving this report. This report does not take into account the particular investment objectives, financial situations, or needs of individual
clients. The report is not to be relied upon in substitution for the exercise of independent judgment. Information and opinions contained herein are as of the
date hereof and are subject to change without notice. The price and value of the investments referred to in this report and the income from them may
depreciate or appreciate, and investors may incur losses on investments. Past performance is not a guide to future performance. Future returns are not
guaranteed, and a loss of original capital may occur. MAS, its affiliates and their directors, officers, employees and agents do not accept any liability for any
loss arising out of the use hereof.
MAS may have issued other reports that are inconsistent with, and reach different conclusions from, the opinions presented in this report. The reports may
reflect different assumptions, views and analytical methods of the analysts who prepared them. MAS may make investment decisions that are inconsistent
with the opinions and views expressed in this research report. MAS, its affiliates and their directors, officers, employees and agents may have long or short
positions in any of the subject securities at any time and may make a purchase or sale, or offer to make a purchase or sale, of any such securities or other
financial instruments from time to time in the open market or otherwise, in each case either as principals or agents. MAS and its affiliates may have had, or
may be expecting to enter into, business relationships with the subject companies to provide investment banking, market-making or other financial services
as are permitted under applicable laws and regulations.
No part of this document may be copied or reproduced in any manner or form or redistributed or published, in whole or in part, without the prior written
consent of MAS.

Mirae Asset Vietnam Research 6

May 9, 2023 Coteccons Construction JSC

Mirae Asset Securities International Network

Mirae Asset Securities Co., Ltd. (Seoul) Mirae Asset Securities (HK) Ltd. Mirae Asset Securities (UK) Ltd.
One-Asia Equity Sales Team Units 8501, 8507-8508, 85/F 41st Floor, Tower 42
Mirae Asset Center 1 Building International Commerce Centre 25 Old Broad Street,
26 Eulji-ro 5-gil, Jung-gu, Seoul 04539 1 Austin Road West London EC2N 1HQ
Korea Kowloon United Kingdom
Hong Kong
Tel: 82-2-3774-2124 Tel: 852-2845-6332 Tel: 44-20-7982-8000

Mirae Asset Securities (USA) Inc. Mirae Asset Wealth Management (USA) Inc. Mirae Asset Wealth Management (Brazil)
CCTVM
810 Seventh Avenue, 37th Floor 555 S. Flower Street, Suite 4410, Rua Funchal, 418, 18th Floor, E-Tower Building
New York, NY 10019 Los Angeles, California 90071 Vila Olimpia
USA USA Sao Paulo - SP
04551-060
Brazil
Tel: 1-212-407-1000 Tel: 1-213-262-3807 Tel: 55-11-2789-2100

PT. Mirae Asset Sekuritas Indonesia
Equity Tower Building Lt. 50
Sudirman Central Business District
Jl. Jend. Sudirman, Kav. 52-53
Jakarta Selatan 12190
Indonesia
Tel: 62-21-515-3281
Mirae Asset Securities Mongolia UTsK LLC
#406, Blue Sky Tower, Peace Avenue 17
1 Khoroo, Sukhbaatar District
Ulaanbaatar 14240
Mongolia
Mirae Asset Securities (Singapore) Pte. Ltd. Mirae Asset Securities (Vietnam) JSC
6 Battery Road, #11-01 7F, Le Meridien Building
Singapore 049909 3C Ton Duc Thang St.
Republic of Singapore District 1, Ben Nghe Ward, Ho Chi Minh City
Vietnam
Tel: 65-6671-9845 Tel: 84-8-3911-0633 (ext.110)
Mirae Asset Investment Advisory (Beijing) Co., Beijing Representative Office
Ltd
2401B, 24th Floor, East Tower, Twin Towers 2401A, 24th Floor, East Tower, Twin Towers
B12 Jianguomenwai Avenue, Chaoyang District B12 Jianguomenwai Avenue, Chaoyang District
Beijing 100022 Beijing 100022
China China

Tel: 976-7011-0806 Tel: 86-10-6567-9699 Tel: 86-10-6567-9699 (ext. 3300)

Shanghai Representative Office
38T31, 38F, Shanghai World Financial Center
100 Century Avenue, Pudong New Area
Shanghai 200120
China
Ho Chi Minh Representative Office
7F, Saigon Royal Building
91 Pasteur St.
District 1, Ben Nghe Ward, Ho Chi Minh City
Vietnam
Mirae Asset Capital Markets (India) Private Limited
Unit No. 506, 5th Floor, Windsor Bldg., Off CST
Road, Kalina, Santacruz (East), Mumbai – 400098
India

Tel: 86-21-5013-6392 Tel: 84-8-3910-7715 Tel: 91-22-62661336

Mirae Asset Vietnam Research 7