X-Stock | GEX: Q3/2025 Business Results Update and Valuation Adjustment

RECOMMENDATION

GEX’s share price has declined 38% from its recent peak, while our valuation has increased by 15% compared with our previous report. Accordingly, BSC upgrades its recommendation from HOLD to BUY, with a 2026 target price of VND 53,100/share, implying 31% upside from the reference price on December 16, 2025. We will revisit our valuation once there is further information regarding U.S. transshipment regulations, which may affect the industrial park real estate segment.

GEX is currently trading at a 2026F P/E of 24.6x, representing a 12% discount to its 2019–2024 average of 27.9x.

2026 BUSINESS OUTLOOK – POSITIVE ACROSS MOST SEGMENTS

1. Electrical equipment segment (GEE): Significant room for market share expansion, with strong benefits from localization policies

• CADIVI’s market share in Northern Vietnam currently stands at approximately 18%, leaving substantial room for growth compared with around 60% in Southern Vietnam. Its competitive advantages include product quality, suitability to customer demand and competitive pricing. In addition, EVN is expected to accelerate investment in the power grid after two years of delays in order to catch up with the implementation schedule of Power Development Plan VIII.

• Another key highlight is that GEE has successfully developed in-house technology to manufacture 500kV–3x300MVA transformers, a segment in which Vietnam is currently fully dependent on imports. This should help the company expand its market share in industrial power infrastructure. In addition, a draft decree on developing the power equipment manufacturing industry proposes a minimum localization ratio of 60% and preferential treatment for domestic contractors in nationally important projects. If officially enacted, this policy could provide a sustainable growth driver for GEE from 2026 onward. BSC will provide further updates when more information becomes available.

2. Building materials segment (VGC): Gross margin recovery and restructuring toward greater efficiency

• Gross margin bottomed in Q4 2024 and has remained above 14% for three consecutive quarters, supported by a more active real estate market and recovering apartment supply. In addition, Hanoi authorities have approved a pilot list of 157 projects covering 862 ha, while Ho Chi Minh City has approved 117 projects covering 1,510 ha under Resolution 171/2024/QH15, which should add significant future housing supply. Against this backdrop, 1H2026 is likely to become a period of accelerating earnings growth for the building materials segment.

• VGC is also restructuring its subsidiaries by streamlining operations, reducing overlaps and centralizing raw material procurement to secure better discounts. BSC expects the selling and G&A expense-to-revenue ratio of this segment to decline to 15.2% in 2025 and 14.7% in 2026, from 15.5% in 2024.

3. Clean water segment (VCW): Higher selling prices and capacity expansion to drive a step-change in earnings

From Q2 2025, the company’s wholesale clean water price increased from VND 5,089/m3 to VND 7,767/m3 (+53%). In early 2026, the Song Da 2 project is expected to commence operations, doubling total capacity to 600,000 m3/day. In 2025–2026, this segment is expected to contribute VND 148bn and VND 162bn, respectively, to NPAT-MI, accounting for around 10% of core earnings, compared with a loss of VND 48bn in 2024.

VALUATION

Our 2025 NPAT-MI forecast is revised down by 22% compared with our previous report. However, the revision mainly reflects a one-off financial gain and therefore has limited impact on the company’s overall valuation.

We use a sum-of-the-parts valuation methodology to estimate GEX’s fair value and raise our target price from VND 46,100/share to VND 53,100/share, an increase of 15%, based on the following key changes:

1. The valuation contribution from GEE, GEX’s core business, increases from VND 24,833bn to VND 28,904bn (+16%), based on the assumption that the company will accelerate its penetration of the residential electrical equipment market in Northern Vietnam and expand sales to EVN power projects following supportive Government policies for the domestic electrical equipment manufacturing industry:

• We raise GEE’s revenue growth assumption for 2026–2028 from 5% per year to 7% per year.

• We raise our gross margin assumption for 2027–2029 from 16.5% to 17.0%.

2. The valuation of the building materials segment increases from VND 2,167bn to VND 2,332bn (+8%), mainly due to a downward revision in the selling and G&A expense-to-revenue ratio from 15.0% to 14.7% from 2025 onward, reflecting restructuring efforts and cost optimization.

3. The valuation of GEX’s EIB stake increases from VND 3,297bn to VND 4,098bn (+24%), as we change the valuation methodology from book value to a P/B-based approach using a 1.5x multiple.

4. The valuation of the industrial park real estate segment is reduced by 5% due to GEE’s divestment from Gelex Infrastructure, which lowers GEX’s effective ownership in the segment.