HPG - Brighter prospect in the flat steel segment
We revise up our forecasts for NPAT in 2H2021 and 2022 as the steel segment’s prospects are becoming better. Decarbonization in the EU and China is changing the steel industry significantly and boosting steel production costs. With less strict environmental requirements, we believe HPG can benefit from this trend until 1H2023. The large differences between HRC prices in Vietnam and other areas, such as the US and Europe, are creating chances for exporting flat steel with higher profit margins. We expect the company to seize these chances from 4Q2021, leading to a higher NPAT forecast. In the construction steel segment, HPG faces short-term difficulties caused by increasing production costs and weak domestic demand in 3Q2021. However, the company can enjoy high growth due to the steel demand recovery after the pandemic and the large investments in infrastructure projects.
Using FCFF, and PER methods, we come up with a fair value of VND 65,700 per share (+11% from our TP in the ). Together with a cash dividend in the next 12 months of VND 1,000/share, the total return is 31%, based on the closing price as of September 24th, 2021. Hence, we reiterate our BUY recommendation
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.
Viet Dragon Securities belongs to top 20 biggest securities companies in terms of chartered capital in Vietnam. With a qualified, dedicated and professional team, a widespread network, advanced technology, diversified products and services, and good relationship with local and foreign institutions, we provide a wide range of services and products to our clients both individuals and institutions, both local and foreign. We commit to provide our clients with promising investment opportunities and a comprehensive and professional financial investment services.
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