HPG Flash note – BUY

HOA PHAT GROUP JSC (HPG VN)

In 2025, HPG delivered earnings broadly in line with expectations (NPAT: +29% YoY), supported by the commissioning of Dung Quat 2 in 1Q2025 and 3Q2025 and its rapid ramp-up to stable operations. As a result, the company achieved 103% of its full-year plan and 95% of ACBS forecasts. Looking ahead to 2026, we expect a more constructive outlook for the steel sector, underpinned by sustained domestic demand. We maintain our 2026 forecasts with revenue of VND205,201 bn (+16% YoY) and NPAT of VND 21,841 bn (+41% YoY). Our 2026 target price is VND 35,700 per share, and we reiterate a BUY recommendation.

In Q4/2025, HPG recorded revenue of VND46,176 bn (+27% QoQ; +34% YoY) and NPAT of VND3,888 bn (-3% QoQ; +38% YoY). Crude steel sales exceeded 1.3 mn tons (+24% QoQ; +14% YoY). HRC sales reached 5.0 mn tons (+26% QoQ+144% YoY;), reflecting contributions from Dung Quat 2 – Phase 2, which commenced operations in September 2025.

In 2025, HPG posted revenue of VND158,332 bn (+13% YoY), achieving 93% of management guidance and 94% of ACBS forecasts, while NPAT reached VND15,515 bn (+29% YoY), equivalent to 103% of plan and 95% of forecasts. The steel segment remained the dominant earnings driver, accounting for 94% of group revenue, while agriculture contributed 5%. Total crude steel sales reached 5.1 mn tons (+15% YoY), and combined sales of HRC, construction steel, high-grade wire rod, and billets totaled 10.6 mn tons (+31% YoY). Notably, HRC sales reached 5.0 million tons (+73% YoY), driven by the completion and commissioning of Hoa Phat Dung Quat Steel Complex 2, which began delivering output from September 2025. In addition, HRC volumes benefited from antidumping duties imposed on Chinese imports, further supporting domestic demand and pricing.

Although gross margin in Q4/2025 declined to 13.9% (from 16.7% in Q4/2025 and 12.7% in Q4/2024), full-year 2025 gross margin improved to 15.7%, markedly higher than 13.3% in 2024, reflecting a broad-based recovery across the HPG’s business segments. The quarterly normalization was driven mainly by: (i) a sharp increase in depreciation following the commissioning of Dung Quat 2 – Phase 2 (VND 2,888 bn; +32% QoQ; +70% YoY); (ii) weaker agricultural margins amid lower average hog prices; and (iii) an ~8% QoQ rise in coking coal prices due to supply disruptions in Australia. In addition, the cessation of capitalized interest lifted interest expense to VND 1,237 bn (+52% QoQ; +120% YoY), temporarily weighing on net margins. We expect these factors to be transitory, with the margin recovery trend intact as new capacity is progressively optimized, input costs stabilize, and steel prices are likely to improve in 2026.