AP reported 2Q23 net profit of Bt1.54bn (-1.9% YoY but +4.5% QoQ), in line with our estimates, backed by a new high for gross margin. This brought 1H23 net profit to Bt3.02bn (-8.5% YoY) accounting for 48% of our 2023 net profit forecast of Bt6.24bn (+6.2% YoY), a new high. 3Q23F net profit is expected to go up both YoY and QoQ. We maintain our tactical call of Outperform based on PE of 7.4X (+0.25SD) with a 2024 TP of Bt15.0/sh.
2Q23 net profit in line. AP reported 2Q23 net profit of Bt1.54bn (-1.9% YoY but +4.5% QoQ) in line with INVX and consensus forecasts. Revenue met forecast at Bt9.28bn (-5.9% YoY and -1.3% QoQ), 6% from condos and 94% from low-rise. Projects transferred in the quarter include The City Pinklao-Borom 3, The City Bangna and Centro Bangna. Gross margin came in at 37.6%, a new high, backed by a strong gross margin on both low-rise at 35.9% and condos at 48.4%. Contribution from the JV was Bt289mn, backed by continuing transfers at The Rhythm Charoenkrung Pavilion. 1H23 net profit came to Bt3.02bn (-8.5% YoY) accounting for 48% of our 2023 net profit forecast of Bt6.24bn (+6.2% YoY), a new high.
Expect presales and new launches to continue to grow in 2H23. Presales as of July 31 were Bt28.3bn (-5.4% YoY), 49% of its 2023 presales target of Bt58bn (+15%), 72% from low-rise, with value down 13.3%, and 28% from condo, with value up 28.4%. AP is planning to launch 40 new projects with total value of Bt56bn, 85% low-rise and 15% condos (three projects). Although its 2023 presales target seems challenging, we believe AP will achieve presales of at least Bt52-53bn, 5-6% growth in 2023.
Backlog remains strong. AP has current backlog of Bt35.1bn, with 61% to be recognized in 2023 and the rest in 2024-2026. By product, backlog is 50% low-rise, 42% JV condos and 8% AP condos. We keep our 2023 revenue forecast at Bt40.8bn (+6%) with net profit expected to grow 6.2% to yet another new high of Bt6.24bn. 3Q23F earnings are expected to improve QoQ and YoY with the start of transfers at two new condos: Aspire Pinklao-Arunamarin (project value Bt1.2bn, 88% sold) and The Address Siam-Ratchathewi (project value Bt8.6bn, 39% sold).
Maintain outperform. We maintain our tactical call of Outperform based on PE of 7.4X (+0.25SD) with a 2024TP of Bt15.0/sh.
Risks and concerns. Elements to watch: 1) Continued steps up in interest rate in 2H23 and rejection trend in low/mid-low segments, 2) inventory management of the massive launches in 2022 coupled with many new launches in 2023,3) possible delays in new launches and 4) cash flow position and uptrend in cost of debt.
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