PSH - 3Q24: Beat on extra gain

PSH reported 3Q24 net profit of Bt373mn (-4.6% YoY but +19% QoQ), 15% above consensus from extra gain of Bt212mn, while core operations remain weak, pressured by a low real estate gross margin. In 2024, PSH further lowered both its new launch and presales targets, which now align with our current forecast. However, we adjust down our 2024 net profit forecast by 13% to reflect the weak gross margin in 3Q24, which gives a new net profit of Bt1.03bn (-53.3%). We maintain our tactical call of Underperform with a 2025 TP of Bt6.30/sh on average PE (16 years) of 10x.

3Q24 Net profit fell YoY but grew QoQ on extra gain. PSH reported 3Q24 net profit of Bt373mn (-4.6% YoY but +19% QoQ), 15% above consensus from extra gain of Bt212mn. Revenue was Bt5.2bn (-9.9% YoY and -2.6% QoQ), 89% from real estate, with value down 13% YoY and 4% QoQ, and 11% from the hospital business, for which value surged 24% YoY and 14% QoQ to a new high. Average gross margin was 25.6%, narrowing YoY and QoQ on a new low real estate gross margin of 26% brought by sale of inventory; gross margin at the hospital was 22%. PSH booked two extra gain transactions (sale of investment and gain on loss of control in subsidiary in the wellness business) for a total gain of Bt212mn. 9M24 net profit was Bt753mn (-63.9% YoY).

Downgrades new launch and presales targets. With the gloomy residential market continuing through 3Q24, PSH’s 9M24 presales were just Bt11.1bn (down 22% YoY), with low-rise value falling 25% YoY and condo down 10% YoY, leading it to cut its 2024 presales target 30% to Bt15.8bn (-15%), which lines up with our current projection of Bt15bn. In line with its lower presales target, PSH also lowered its new launch target to Bt20bn from Bt27bn (+41%) with the most launches in 4Q24 at 10 projects valued at Bt9.8bn.

Maintain 2024 revenue but downgrade net profit. PSH has current backlog of Bt4.77bn with 46% to be recognized in 4Q24 and 52% to be booked in 2025. Although we expect the hospital and wellness business to grow further in 4Q24 and beat its revenue target of Bt2bn (+20%) by 10% to Bt2.2bn, given weak real estate revenue, we keep our 2024F revenue at Bt19.7bn (-18.3%), 89% from real estate and 11% from its hospital business. In view of the weak gross margin on SDH in 3Q24, we downgrade our average gross margin to 27.6% from 30.1%, giving an 2024F adjusted net profit of Bt1.03bn (-53.3%). Note that we have not included any extra gain from the business restructuring it is undergoing.

ESG key risk. Operational risk: Continued high rejections in the mid-low/low segments. Early stage of investment may create loss. ESG risk: PSH is listed on SET ESG ratings as BBB, with ESG above mean; however, PSH has to implement in sustainable products used and climate exposure.