LH - 3Q24: Big miss with a YoY, QoQ plunge

LH reported a 3Q24 net profit of Bt650mn (-45.2% YoY and -36.1% QoQ), hit by poor real estate revenue and gross margin. We expect it to report 2024 presales of Bt20bn, missing its presales target by 35% (-13%), despite a rise in presales in 4Q24 on Bt12.2bn in new launches. Thus, we downgrade our 2024F revenue by 10% to Bt25.2bn (-4.5%), but after including gain from asset divestment to LHSC we derive an adjusted net profit of Bt5.34bn (-28.6%). 4Q24F net profit is estimated at Bt2.44bn (-30% YoY but +276% QoQ). We maintain our Neutral call with 2025 TP of Bt6.60/share based on +0.5SD PE of 14.7x, assuming recovery in 2025 and healthier cash flow from asset divestment. It announced an interim dividend of Bt0.15/share, XD on Nov 28.

3Q24 net profit sank 45.2% YoY and 36.1% QoQ. LH reported 3Q24 net profit of Bt650mn (-45.2% YoY and -36.1% QoQ), 29% below consensus on lower real estate revenue and gross margin. Revenue was Bt5.7bn (-9.6% YoY and -12.1% QoQ), 60% from sale of real estate, where value fell 23% YoY and 21% QoQ on fewer launches and low transfers and 40% from rentals, where value grew 21% YoY and 6% QoQ. Average gross margin was 25.1%, a new low, with a real estate gross margin of 21% while rental gross margin was 31%. Interest expense remained high while contribution from subsidiaries was little changed at Bt811mn. 9M24 net profit was Bt2.89bn (-27.4%).

Estimate 35% miss to 2024 presales target. LH reported 3Q24 presales of Bt4.76bn (-15% YoY but +11% QoQ) with low-rise value down 43% YoY and 19% QoQ and condo presales growing 809% YoY and 262% QoQ on the opening of a new phase of Wan Vayla Na Chaopraya. This brought 9M24 presales to Bt14.6bn (+2% YoY), accounting for just 47% of its 2024 presales target of Bt31bn (+35%). We now expect LH to report 2024 presales of Bt20bn (-13%), falling 35% short of its target. Although it is planning to launch six new projects valued at Bt12.2bn, equivalent to 40% of its 2024 plan of Bt30.8bn (-29%), demand remains soft and rejection rates high.

4Q24F to drop YoY but be outstanding QoQ. Although current backlog is strong at Bt9.2bn, only 19% or Bt1.77bn will be booked as revenue in 4Q24-2025 while the remaining Bt7.45bn will be booked in 2026-2027. This leads us to lower our 2024 revenue forecast by 10% to Bt25.2bn (-4.5%), with 4Q24 revenue to slip YoY but improve QoQ, underwritten by projects newly opened and ready to transfer in the quarter. In our net profit forecast, we have included a net gain of Bt1.6bn from divesting Terminal 21 Pattaya shopping mall to LHSC, which gives an adjusted 2024F net profit of Bt5.34bn (-28.6%). 4Q24F net profit is expect to come in at Bt2.44bn (-30% YoY but +276% QoQ)

ESG key risk. Operational risk: Inventory management in SDH and luxury condos. Also, LH has delayed construction of some projects with lower take-up rates. ESG risk: LH was listed as A on SET ESG ratings with net zero by 2065 upon more implementation of sustainability products.