SPALI - 3Q24: Net profit jumps YoY and QoQ

SPALI reported 3Q24 net profit of Bt1.99bn (+67% YoY and 24.4% QoQ), 5% below our forecast on higher interest expense. Underwriting the earnings growth was high revenue from backlog recognition and a healthy gross margin. In 4Q24, we expect net profit to drop both YoY and QoQ, bringing 2024F net profit to Bt6bn (flat YoY). With low backlog and thus low secured revenue in 2025, plus aid from the new investment in Australia, we expect 2025 earnings growth of 5%. We stay Neutral with a 2025 TP of Bt20.0 on PE of 6.2X (-0.25 S.D., 18 years).

3Q24F net profit jumped 67% YoY and 24.4% QoQ, but 5% below INVX. SPALI reported 3Q24 net profit of Bt1.99bn (+67% YoY and 24.4% QoQ), 5% below our forecast, with the miss from higher interest expense. Revenue was Bt9.8bn (+37.3% YoY and +23.8% QoQ) with 55% from low-rise and 45% from condos, the latter from backlog at Supalai Icon Sathorn and the start of transfers at a new condo, Supalai Loft Phasi Charoen Station (project value Bt1.1bn, take-up rate 96%, 83% transferred). Average gross margin was 39.6%, widening both YoY and QoQ, backed by a higher condo gross margin. JV contribution was Bt39mn, surging 908% YoY, but sinking 83.5% QoQ. Interest expense grew 46.8% YoY and 26.7% QoQ on higher debt in 3Q24 at a higher cost. 3Q24 net profit brought 9M24 net profit to Bt4.2bn (+5.8% YoY).

Maintain 2024F and 2025F. Of current backlog of Bt13.2bn (42% low-rise and 58% condos), 60% will be booked as revenue in 4Q24 and the remaining 40% in 2025-2026. We thus maintain our 2024 net profit forecast of Bt6bn, flat YoY, with 4Q24F earnings dropping YoY and QoQ. After 4Q24, SPALI will need to bulk up backlog via expanding its low-rise sales base and more aggressive condo launches: low-rise buildings will fill up 2026 backlog, with 2027 populated by high-rise. Backlog in 2025 is low, securing only 8% of our revenue forecast of Bt30.8bn (-3.7%); net profit is forecast at Bt6.3bn (+5.1%) with the new Australia venture included.

Risks and concerns. Inventory management: since 2024 is SPALI’s highest year ever for launches in terms of value at Bt50bn, unsold units and inventory management in 2025 will be key to earnings and cash flow. Currently, SPALI has put 105 of the unsold units in Supalai Icon Sathorn up for long-term rentals.

ESG key risk. Although SPALI obtains EIAs for residential projects, which helps lower environmental risks, lawsuits have been filed against some condos, which we see as ESG risks for environmental and social elements as they affect surrounding neighborhoods and governance.