HPG Update – BUY

HOA PHAT GROUP JSC (HPG VN)

HPS’s 2Q2026 and 1H2026 earnings exceeded our expectations, primarily driven by stronger-than-expected performance in the steel business and a one-off financial gain from the divestment of the Pho Noi real estate project. Excluding this non-recurring gain, underlying earnings were broadly in line with our forecasts.

We maintain our positive view on HPG, supported by a favorable demand outlook driven by public infrastructure investment, the ramp-up of Dung Quat 2, and trade protection measures against HRC imports from China.

Accordingly, we raise our FY2026 and FY2027 NPAT forecasts by 25% and 10%, respectively, to VND27.5 tn (+78% YoY) and VND33.2 tn (+21% YoY), reflecting the one-off gain from the Pho Noi divestment and additional earnings contribution from capacity expansion projects scheduled to come on stream from 2027. We therefore reiterate our Buy recommendation and increase our end-2026 target price by 5% to VND33,800/share.

HPG delivered strong 2Q2026 results, reporting revenue of VND55.2tn (+54% YoY) and NPAT of VND6.4tn (+50% YoY), supported by continued volume growth and further gross margin expansion. Crude steel production reached 3.6mn tonnes (+48% YoY), while steel sales increased to 3.5mn tonnes (+35% YoY).

In 1H2026, HPG reported revenue of VND108.1tn (+47% YoY) and NPAT of VND15.4tn (+102% YoY), achieving 52% of its full-year revenue target and 70% of its earnings target, equivalent to 53% and 71% of our forecasts, respectively. The steel segment remained the primary earnings driver, generating revenue of VND105.0tn (+51% YoY) and NPAT of VND10.5tn (+67% YoY), accounting for 96% of consolidated revenue and 68% of consolidated earnings. Notably, HRC sales outpaced crude steel production growth (+57% YoY vs. +36% YoY), reflecting the successful ramp-up of Dung Quat 2, which was operating at more than 80% of designed capacity during the period.

Meanwhile, gross margin expanded to 19.0% in Q2/2026, up from 15.8% in the previous quarter and 18.4% a year earlier, driven by improved operating leverage from higher sales volumes and favorable inventory gains, which more than offset raw material cost pressures. Consolidated earnings were further supported by a one-off gain of VND4.3tn from the divestment of the Pho Noi real estate project, contributing approximately 28% of 1H2026 consolidated NPAT.