AP – Growth recovers in 2025F

We have upgraded our tactical call on AP to Outperform from Neutral with a new 2025 TP of Bt12.90/sh (from Bt10.60/sh), our valuation based on 10-year PE average of 7x, supported by greater backlog on hand that will back 2025 earnings growth of 9%. We also believe AP will benefit from a lower interest rate, which will foster growth in 2025 presales.

3Q24 launches as planned. In 3Q24, AP launched 12 projects: nine townhouses (total value of Bt7.2bn), two projects upcountry (Rayong and Supan Buri, Bt1.7bn) and one AP condo (Aspire Itsarapha Station, Bt800mn); scheduled for completion in 2H25. This brings 9M24 launches to 35 projects valued at Bt40.2bn. To meet its 2024 launch plan of Bt58bn (-24%), AP must launch another 13 projects (Bt17.7bn) in 4Q24, two of which will be condos (Bt3.9bn), which will underwrite presales.

Expect 3Q24F presales to grow 20% YoY. We estimate AP’s 3Q24F presales at Bt14bn (+20% YoY and flat QoQ), 65% from low-rise and 35% from condo, backed by presales of Life Charoenakhon Station (project value Bt2.5bn). This was launched at end-2Q24 with a take-up rate of 55%, but booking of sales of Bt1.2bn was put off to 3Q24. The new condo launched in 3Q24, Aspire Itsarapha Station (Bt800mn), has a take-up rate of 25%, which is expected to bring 9M24 presales to Bt38bn, 67% of its 2024 target of Bt57bn (+11%). On this basis, we believe AP will achieve its 2024 presales target of Bt51-52bn, close to presales in 2023.

Maintain 2024F. As of August 31, AP has a new high for backlog at Bt47bn, up Bt4.4bn from July. By product, backlog is 43% low-rise, 48% JV condo and 9% AP condo. We maintain our 2024F revenue forecast at Bt39.1bn (+2.9% YoY). Since we expect gross margin in 2H24F to be lower than 1H24 from product mix and pressure from high interest, we estimate net profit at Bt5.38bn (-11%). We expect 3Q24F net profit to go up QoQ on low-rise backlog transfers and the start of transfers at the JV condo Life Rama4-Asoke (project value Bt6.5bn, take-up rate 48% with Bt1.3-1.4bn expected to transfer) but drop YoY off a high base.

Raise 2025F on high backlog. AP’s backlog is high and the amount scheduled to be booked in 2025F grew from our previous forecast on Bt4bn low-rise backlog that will be carried over from 2024 and a small condo that will be transferred in 2025. We thus raise our 2025F revenue by 5% to Bt42.9bn (+9.5%) and net profit to Bt5.86bn (+9%).

Risks and concerns. Higher competition and inventory management. ESG key risks: AP obtains EIAs for both low-rise and condos, which helps lower environmental risks (E). The Chairman of the Board is an independent director (G), as of 2023.