1H2024 steel industry outlook – Output sales to recover
- In 1Q24, construction steel consumption was flat compared to the same period last year, when the residential real estate projects (main consumption sector) have not promoted sales/construction phase in the 1Q. For hot-rolled coil (HRC) and downstream products (coated steel sheets, steel pipes), sales volume maintained positive growth compared with 2023, owing to demand from foreign markets (ASEAN, EU, US). Notably, the EU market has surpassed ASEAN to become Vietnam's key export market.
- In April, we noticed that the domestic market showed clear signs of recovery compared to the 1Q24, especially in the northern market. We believe that the recovery comes from: 1/ Residential real estate projects and public investment projects are pushing construction activities and 2/ Inventory accumulation activities before the rainy season. Thereby, we expect that domestic sales output of steel companies can remain at a high level in the 2Q 2024, which is a supprtive factor for the business results, in the context of expectations for the stable profit margin (expected output price is relatively stable in 2Q).
- For 2024, HPG (Buy, target price: VND 33,900) is our top pick due to its leading industry position and investment plans to take advantage of the sector's recovery cycle. In addition, GDA (Non-rated) is a stock that investors can pay attention to, with: 1/Expectation of domestic output to recover in the 2Q; 2/ The stock is trading at a PBR of 0.8x, relatively low compared to peers (galvanized steel sheet companies are traded at a PBR of 1.2x). Coated steel stocks, including HSG (Accumulate, target price: VND 24,300) and NKG (Neutral, target price: VND 24,600), with the anticipated recovery in 2Q has started to be reflected in stock prices, which are more suitable for short-term trading strategies when the market price adjusts relatively to our TP.
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