HPG Update – BUY

HOA PHAT GROUP JSC (HPG VN)

HPG reported Q3/2024 results showing a continued trend of resilient profits. Cumulative 9M2024, HPG reported VND9,210 bn of NPAT, completing 92% of company 2024 target and 86% of our forecast. Going forward, we see that the launching of Dung Quat 2 in Q1 2025 will be the key catalyst for HPG’s earnings growth.  For 2025, we forecast a NPAT of VND16,289 bn, implying 23% YoY growth. Our new target price for 2025 is VND32,900/share. Rating BUY with a total upside of 29%.

Total sale volume still increased in Q3/2024 despite low season for construction

In Q3, sale volume of HPG rose strongly, reaching 2.26 mn tonnes (+ 32%YoY) despite the low season for construction. In which, sale volume of construction steel and HRC increased by 19.2% YoY and -3.1% YoY, respectively. 

Q3/2024’s profit exceeded expectation thanks to input costs decreasing faster than selling prices

In Q3/2024, HPG reported revenue of VND34,000 bn (+19% YoY) and a NPAT of VND3,022 bn (+29% YoY). Gross margin slightly improved to 14% compared to 13% in the 1H2024.

Cumulatively, for 9M2024, the company reported a top line of VND105,000 bn (+23% YoY) and a NPAT of VND9,210 bn (+140% YoY), achieving 75% and 92% of its target respectively. 

Launching Dung Quat 2 in Q1/2025 will help to boost 2025 earnings growth (+23% YoY)

For 2025, we expect HPG to achieve revenue of VND182,900 bn (+29% YoY) and net profit of VND14,844 bn (+23% YoY). Key catalyst for 2025 earnings would be the HRC capacity expansion from Dung Quat 2 operation in Q1/2025 (forecasted production volume of 5 mn tonnes in 2025, equivalent to 85% of utilization rate). Besides, the impose of anti-dumping tax for HRC imported from China and India, if passed, would significantly support for HRC price in the domestic market. However, for the purpose of prudence, we have not fully reflected the effects of the anti-dumping tax impact on our model.