FREE

Analyst Pin-board HPG – Hot-rolled coil segment to perform well in 3Q

The hot-rolled coil (HRC) segment is playing a central role in HPG’s business as the company is benefiting from increasing HRC prices and the robust demand from coated steel exporters. For 3Q2021, we expect this segment’s gross margin can remain stable at a high level as in 2Q. HRC price’s outlook is better than our expectations as prices for HRC delivered in July are more than USD 1,000 /ton. Meanwhile, the construction steel segment’s gross margin can decrease in 3Q compared to 2Q due to the weak demand. Hence, we forecast the company’s NPAT will be roughly VND 10,200 billion in 2Q, then decrease to VND 8,900 billion in 3Q. We revise up our 2021 NPAT forecast by 17% from VND 29,000 billion to VND 34,000 billion. Based on EPS forward in 2021 of VND 7,140, HPG is trading at a PE ratio of 7.2x. As Quang Ngai province has approved the investment policy of Dung Quat 2 Steel Complex, we are reviewing the valuation to assess this project’s impact in the long term. We will update the new target price in our Result Update Report, which is planned to publish this month.