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Analyst Pin-board: Update on HSG

For FY2019-2020, HSG’s targets are noticeably conservative, thus we forecast it is likely to exceed these, particularly in regards to net income. Based on HRC price of USD 450-480/ton, HSG expects its revenue and selling volume to remain at VND 28,000 billion and 1.5 million tons, while net income will grow 11% to VND 400 billion.In terms of selling volume, we suppose the target of 1.5 million tons can be achieved as the domestic demand is forecasted to grow at 8-10% while exporting activities are challenging. Due to its advantage in the retail system, we expect HSG’s domestic selling volume will increase by more than 5%, which can offset the possible decrease in exports.Regarding net income, we expect HSG can meet and even exceed the target due to the positive Q1/FY2019-2020 results and the favorable HRC price movement. In Q1/FY2019-2020, HSG’s net income (VND 170 billion) was equivalent to 42.5% of its FY2019-2020 plan (VND 400 billion). Currently, the HRC price is recovering to more than USD 500/ton after hitting a bottom in October 2019 (USD 425/ton). If America and China have a trade deal on 15/01, HRC price can be supported and maintain at more than USD 500/ton. Owing to HRC’s uptrend and HSG’s 3-month production inventory, the company can benefit from HRC price gap in Q2/FY2019-2020 and meet the net income target in just two quarters.