Vinaconex (HOSE: VCG) | Initiation Report, BUY – 1Y Upside +22.1%

Company Overview

Vinaconex (VCG) was a state-owned company, established in 1988 under the original name Foreign Services and Construction Company with the mandate of managing Vietnamese construction labor working overseas. In 2006, the company was equitized and restructured into a joint stock corporation. VCG listed its shares on the Hanoi Stock Exchange (HNX) in 2008, before the state fully divested its ownership in 2018. In 2020, the company moved its listing to HOSE to improve capital access and align corporate governance with large cap listed company standards.

VCG is currently one of the largest private construction contractors in Vietnam, with a strong track record across various sectors including transportation infrastructure, aviation, industrial, and civil construction. The company has been involved in key national projects such as Nhat Tan Bridge, Thang Long Boulevard, the North–South Expressway, and Long Thanh International Airport. In addition, VCG also has subsidiaries in energy, clean water, and education sectors to diversify its revenue streams and support sustainable growth.

Financial Performance

From 2019 to 2024, VCG recorded a compound annual growth rate (CAGR) of 9.8% in revenue and 7.6% in net profit after tax (NPAT). The growth was mainly driven by the recovery of construction activities post COVID-19 and high contributions of profit from the real estate projects in 2023 and 2024.

In 2024, VCG posted net revenue of VND 12,870bn and NPAT of VND 1,108bn, up 179.8% YoY. The sharp increase was primarily due to the handover of Green Diamond (93 Lang Ha) and the recognition of construction revenue from key public investment projects.

For 2025, VCG targets revenue of VND 15,500bn (+20.4% YoY). However, NPAT is expected to decline by 12.6% YoY to VND 1,200bn, with 70–75% of NPAT come from real estate. Constructon revenue is expected to grow at a faster pace, but profit margin is thin. It contributes more than 70% of revenue, but less than 20% to consolidated profit.

At the end of Q1/2025, total consolidated assets reached VND 28,991bn. Inventories stood at VND 7,212bn, accounting for 25% of total assets, reflecting large unfinished real estate assets such as Cat Ba Amatina, Hoa Binh Avenue Extension, and ongoing construction costs. The debt-to-equity ratio stood at 1.59x, slightly down from 1.66x at the beginning of the year.

Investment Rationales

VCG is one of our top picks under the public investment theme for 2025 and beyond. Below are the key catalysts for the stock:

The construction sector is expected to experience robust growth in the period 2025-2030, driven by accelerated public investment initiatives and the recovery of the residential property in Vietnam

• Vietnam targets GDP growth of 7.5–8% in 2025 and double digit afterward, supported by an easing monetary policy and accelerated public investment disbursement. The government put forward an ambitious target of disbursing over USD 31bn under infrustructure investment category in 2025.
• Key national infrastructure projects such as the North–South Expressway, Ring Roads in Hanoi and Ho Chi Minh City, Long Thanh International Airport, and industrial and urban infrastructure will continue to be strongly implemented. Those projects will provide massive demand for construction in Vietnam in 2025-2030 period.
• The rapid expansion of the middle class and high urbanization rate are driving strong housing demand. Real estate policies remain supportive, creating a positive spillover for construction demand. The government is fixing issues in many projects; this will enable a number of residential projects to be back to their construction.

Proven Construction Capability with Large Backlog

• VCG, as a leading general contractor in Vietnam with upper hand capacity and deep experience in industrial construction, is well-positioned to participate in the major infrastructure projects. Its full package contracting model enables the company to optimize both timelines and costs and act as an advantage over competitors. With over 30 years of experience, VCG has delivered multiple national-sc. With over 30 years of experience, VCG has delivered multiple national-scale infrastructure projects.
• As of April 2025, VCG’s backlog stands at approximately VND 15,000bn. These projects, mostly funded by public investment, provide stable revenue visibility for the next 2–3 years.

Own a Huge Land Bank of 2,000 Hectares, which Supports Long-Term Growth with High Profit Margins

• The company holds a strategic land bank of over 2,000 ha, including key developments such as Cat Ba Amatina (172 ha).
• The urban and resort real estate segment enjoys high gross margins of 30–50% thanks to VCG's low land acquisition costs. The shift toward industrial park development is expected to generate sustainable revenue flows through land leasing and infrastructure services
• VCG adopts a vertically integrated model from land ownership and project development to construction and operations. This enables quality control and value chain optimization.

Diversified Financial Investments for Stable Income

• VCG holds equity stakes in multiple cash-generating businesses such as Viwaco (water supply), Ngoi Phat Hydropower Plant (84 MW), DakBa Hydropower (30 MW), and the Ly Thai To education system. These are all long-term businesses with visible prospects and cashflow

Valuation and Recommendation

Due to the complex structure of the firm, we combine DCF, P/B and SOTP valuation methods to evaluate the fair value of VCG. We recommend to BUY with a 12M Target Price of VND 24,600/shares, representing 22.1% upside compared to the closing price of 20,150 per share as of 16/06/2025. For a 3-year period, we value VCG at VND 34,350 per share, representing 70.4% upside.