AsemconnectVietnam - Joint Stock Commercial Bank for Foreign Trade of Vietnam Securities (VCBS) announced the Hoa Binh Construction Analysis Report (code HBC - HOSE) when forecasting that this unit may lose money for the third consecutive year.

VCBS estimates that in 2024, Hoa Binh Construction will record revenue increasing by 22%, to VND9,195 billion, pre-tax profit will continue to lose VND480 billion compared to the same period of VND1,080 billion; and in 2025, revenue increases by 19.9%, to VND11,027 billion and pre-tax profit returns to VND39 billion.
It is known that Hoa Binh Construction has experienced two consecutive years of losses when in 2022 it recorded a loss of VND2,332.9 billion and in 2023 it recorded an additional loss of VND1,079.82 billion.
Returning to the Analysis Report, in which, the independent analyst said that Hoa Binh Construction's business prospects still have many uncertain factors such as cash flow from receivables is still relatively large, the residential real estate market has not had a clear recovery, domestic job sources are still limited and finally, the strategy of expanding into foreign markets needs a longer time to have a positive impact on the profit margin.
It is known that as of March 31, 2024, Hoa Binh Construction is recording short-term receivables of 10,239.5 billion VND, accounting for 68.8% of total assets, and the provision for bad debts is VND2,387.2 billion.
VCBS commented: "Although Hoa Binh Construction has actively accelerated the debt collection process, the recovery speed is still relatively slow. This poses a significant risk to Hoa Binh Construction's business results in case receivables continue to become bad debts and the business must make provisions."
However, the positive point is that recently Hoa Binh Construction has made efforts to restructure its capital structure, improve equity, and reduce the interest burden. In particular, the Company approved plans to issue debt swap shares, sell debt, issue private shares, and transfer equipment.
“If debt restructuring plans are successful, recorded profits will partly offset accumulated losses in equity, helping to thicken capital buffers and create motivation for recovery in the near future,” VCBS expected.
In addition, the strategy to expand foreign markets shows positive points when in the first quarter of 2024, the estimated total contract value from foreign markets of Hoa Binh Construction reached USD52.8 million, equivalent to VND1,343.5 billion.
And finally, in the context of limited capital, Hoa Binh Construction has expanded its real estate segment by using capital from offering shares to partners to buy real estate projects.
“The M&A of projects with clean legal status and ready for handover helps Hoa Binh Construction speed up the progress of cash flow recognition. This is a suitable strategy during the period of Hoa Binh Construction's large cash flow congestion in receivables. However, buying back a project with capital from stock issuance carries potential risks of share dilution for the business," VCBS said.
In terms of business activities, in the first quarter of 2024, Hoa Binh Construction recorded revenue of VND1,650.9 billion, an increase of 38.2% over the same period, profit after tax recorded a profit of VND57.75 billion. Compared to the same period, the loss was VND443.8 billion. In particular, the Company no longer operates below cost price, gross profit margin changed from negative 17%, to positive 1.3%.
It is known that in 2024, Hoa Binh Construction plans a total revenue of VND10,800 billion, an increase of 43.3% over the same period, expected profit after tax of VND433 billion compared to a loss of VND1,110.7 billion in the same period.
Thus, ending the first quarter of 2024 with a profit of VND57.75 billion, Hoa Binh Construction only completed 13.3% of the year's plan.
Although profitable again after two years of losses, as of March 31, 2023, Hoa Binh Construction still has an accumulated loss of VND3,182.46 billion, equal to 116.1% of equity (equity is only VND2,741.33 billion).
N.Nga
Source: VITIC/Tinnhanhchungkhoan