Analyst Pin-board HSG AGM update - An ambitious plan to become one of the leading construction material retailers in Vietnam and ASEAN
HSG’s net income in 1Q FY 2020-2021 was positive, and the result could still be good in 2Q as the company has inventory accumulated at a low price. We think HSG’s high profit was supported by the HRC price and it will return to the normal phase with a lower gross margin in 2H FY2020-2021. The HRC price could decrease in 3Q FY2020-2021 after surging in the last six months due to the temporary supply shortage of steel and materials. Regarding HSG’s new strategy, the company will enter a new phase as it will focus on developing a retail system and not invest more in factories. We think this is a suitable orientation for the company to create some growth momentum in the next years. This is because the competition in the steel pipe and coated steel segments is going to be harsh as several manufacturers now are able to produce hot-rolled coils. Besides, construction material retail markets are fragmented and larger compared to the only downstream flat steel market. However, HSG needs time to test and develop the right model for sustainable growth. Hence, we recommend monitoring this stock.
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