·         Stable recovery of the domestic market compensated for export slowdown in Q1. Revenues jumped 47% YoY to VND 7,151 billion and NPAT-MI grew better at 59% YoY to VND 507 billion, thanks to the reversal of inventory devaluation provisons.

·         Q2 exports will benefit from high demand from overseas. The HRC price gap between Vietnam and Western markets expanded in March implying a better export gross profit margin. The situation will reverse in 2H with domestic market leading sales while export outlook turns dim due to high inflation and high inventories in Western markets.

·         For 2022, we project total selling volume to fall 31% to 743.6 thousand tons. Average HRC price will rise 12%, while ASP increase 4%. Thus, the gross profit margin could reach 10.2%, lower than 15.2% of 2021. Revenue and PAT are expected to come at VND 20,030 billion (-29% YoY) and VND 1,185 billion (-47% YoY).

·         The plan to expand capacity from current 1.1 million tons to 2.3 million tons from 2027 will support growth quality in mid- and long-term. However, as the capacity increase won't come any earlier than 2024, therefore, is unlikely to support the stock price in the short term.

·         NKG is now trading at a TTM PER of 1.8x, lower than 2.3x of 2021. However, as this year profit will be lower compared to the peak of last year, the PER forward for 2022 is 3.7x. Thus, the stock seems unattractive at the current valuation. We recommend to OBSERVE this stock as we think profits will rebound next year, when inflation eases globally.