AP - Preview 3Q24F: Net to fall YoY, grow QoQ

We forecast 3Q24F net profit at Bt1.42bn (-16.1% YoY but +12.1% QoQ) with little change in revenue both YoY and QoQ but a lower gross margin; JV contribution remains strong. Although 2024 earnings are expected to fall, we look for recovery both YoY and QoQ in 4Q24F. In view of the high backlog for 2025F, we expect net profit to grow 9%. We maintain our tactical call of Outperform with 2025TP of Bt12.90/sh.

3Q24F net profit to drop 16% YoY but grow 12% QoQ. We estimate AP’s 3Q24 net profit at Bt1.42bn (-16.1% YoY but +12.1% QoQ) backed by revenue of Bt9.9bn (-1.5% but +1.3% QoQ), 90% from low-rise and 10% from condos. We expect gross margin to narrow to 33.5% (from 35.5% in 3Q23 and 34.9% in 2Q24) from a greater proportion of low-rise transfers carrying a lower gross margin. JV contribution is expected to shoot up 104% QoQ but be flat YoY from new transfers at the JV condo Life Rama 4-Asoke (project value Bt6.5bn, take-up rate 62% with transfers of Bt1.75bn). If 3Q24F net profit in comes as expected, 9M24 net profit will be Bt3.7bn (-21.6%).

9M24 presales at 66% of 2024 target. In 3Q24, AP launched 12 projects: nine townhouses (total value of Bt7.2bn), two projects upcountry (Rayong and Supan Buri, Bt1.7bn) and one AP condo (Aspire Itsarapha Station, Bt800mn, scheduled for completion in 2H25). This gave 3Q24 presales of Bt13.4bn (+15% YoY but -7% QoQ), 68% from low-rise and 32% from condo; presales for low-rise grew 7% YoY and 8% QoQ and for condos grew 35% YoY and fell 28% QoQ on lower value launched. 9M24 presales came to Bt37.5bn (+6% YoY) and accounted for 66% of its 2024 presales target of Bt57bn (+11%). We believe AP will end up with 2024 presales close to 2023’s at Bt51-52bn, missing its 2024 target by ~10%.

Maintain 2024F, with growth in 2025F. We expect 4Q24F net profit to go up YoY and QoQ, backed by transfer of backlog for both low-rise and JV condo, notably the remainder of Life Rama 4-Asoke. We maintain our 2024F revenue forecast at Bt39.1bn (+2.9% YoY). Since we expect gross margin in 2H24F to be lower than 1H24 from product mix and pressure from high interest, we estimate net profit at Bt5.38bn (-11%). Given the solid backlog scheduled to be booked in 2025F, we expect revenue to grow 9.5% to Bt42.9bn with a net profit of Bt5.86bn (+9%).

ESG key risks. Competition is getting higher and inventory management is vital. ESG key risks: AP obtains EIAs for both low-rise and condos, which helps lower environmental risks (E). The chairman of the board is an independent director (G), as of 2023.