Date: October 29, 2024
Broker: UOB Kay Hian
3Q24 Earnings Performance
LPN Development (LPN) is projected to report a net profit of Bt71 million for the third quarter of 2024, reflecting a 32% year-on-year (yoy) decrease and a 27% quarter-on-quarter (qoq) decline. The quarterly drop in profitability is largely due to a reduction in transfer volumes and the impact of aggressive promotional campaigns aimed at boosting sales.
Transfer Revenue and Project Contributions
LPN’s transfer revenue is anticipated to reach Bt1.57 billion, a 12% increase compared to the same quarter last year but a 10% decline from the previous quarter. This yoy growth in transfer revenue is mainly driven by the condo project Ville Charun Fai Chai, while the qoq drop reflects the absence of bulk sales, which previously contributed to higher revenue.
Residential Gross Margin
The residential gross margin for LPN is expected to remain low at around 18%, primarily due to the company’s aggressive promotional efforts. These campaigns have been essential for sustaining sales momentum, but they have also exerted pressure on margins, limiting the profitability of LPN’s residential portfolio.
Presales Trends and Segment Performance
LPN’s presales for 3Q24 have shown mixed results across segments, with both high-rise and low-rise properties experiencing challenging market conditions. Economic uncertainties and subdued demand for residential properties have contributed to these results, underscoring the challenges LPN faces in maintaining growth in a competitive landscape.
Sector Standing and Market Outlook
UOB Kay Hian maintains a “Market Weight” rating for the Thai property sector, reflecting a cautious perspective on the residential property market. LPN’s performance in 3Q24 reflects the broader challenges within the sector, as high promotional activity becomes necessary to attract buyers in an environment of cautious consumer sentiment.
Risks and Strategic Considerations
LPN faces several key risks, including potential further reductions in profit margins if promotional activity continues at high levels. Additional risks include tighter lending conditions and increased costs, both of which could impact LPN’s ability to drive profitability in upcoming quarters. The company will need to carefully balance growth initiatives with cost management to sustain its market position.
