Analyst Pin-board HPG – Global Inflation to Cast Gloomy Outlook
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· Impressive construction steel output growth in the context of high selling prices in 1Q2022. · Raw material prices for steel production have fluctuated strongly and could remain high for a while. · Gloomy global durable goods demand outlook will slow down HRC consumption in the next 12 months. Slow consumption of construction steel due to weak demand in the short term but long-term outlook remains positive. · For 2022, we expect revenue and NPAT to come at VND 140,812 billion (-6% YoY) and VND 25,884 billion (-25% YoY). The slump in the bottom line is the results of high material costs and weak consumption in 2H2022. The Q2 result is estimated to be VND 38,120 billion for revenue (+8.5% YoY) and VND 4,979 billion for NPAT (-49% YoY). The construction steel will recover better than flat steel in 2023, thanks to the government’s stronger public investment disbursement. · HPG stock is trading at PER of 4.5, significantly lower than average PER of 16.0 in the last 5 years. The strong discount seen in the recent months could be attributed to the news of weak steel volumes and prices in Q2. As the profit of 2H2022 is expected to be low, compared to the hike of 2H2021, there will not be much accelerate momentum for stock price, least until the end of the year. Our target price of VND 35,600/share reflects more the long term growth outlook, given that Dung Quat 2 will operate from 2025 and the world steel consumption prospect will rally from 2024. |
Hoa Phat Group JSC. Hoa Phat Group Joint Stock Company is a Vietnam-based company primarily engaged in the steel sector. The Company's operation is organized under four segments, including Steel segment, which manufactures steel and cast iron in various forms, such as sheets, bars, rolls and pipes, as well as steel-making materials and steel drawing machinery; Industrial segment, which produces and trades construction and mining vehicles and equipment, along with household appliances, refrigerators, home and office furniture; Agriculture segment, which farms cattle and poultry, processes and preserves meat, as well as manufactures and distributes animal feeds, fertilizers and agricultural supplies, and Real Estate segment, which constructs civil engineering projects and leases houses, offices and land.
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