HSG- Advantage at domestic market is key to recovery
Hoa Sen Group JSC (HSX: HSG) has been through a volatile period due to reduced raw material prices and risky speculative activities. Disappointing business results have put pressures on investor sentiment and its stock price.
Nevertheless, Hoa Sen maintains its key advantage in the domestic retail market thanks to a strong brand name and domestic distribution network while its direct competitors rely more on lower margin exports.
By reducing speculation activities and limiting transactions with related parties, HSG is on the right track to restore profitability. The increasingly fierce competition in both domestic and international markets is making a lot of domestic manufacturers face difficulties. We believe that HSG has the higher ground to recover in the intermediate term.
Using FCFF and P/E valuation methods, we estimate the fair value of HSG stock at VND 11,400 per share, equivalent to an expected return of 25% compared to the closing price on April 12th 2019. Therefore, we recommend to BUY the stock.
Hoa Sen Group is a Vietnam-based company primarily engaged in the steel industry. It manufactures galvanized steel products, color coated steel products, cold rolled steel coils, steel tubes and other steel products. It is also involved in the manufacture of plastic pipes and fittings, as well as plastic roofing sheets. In addition, the Company trades construction fixtures; operates hotels, restaurants and retail complexes; constructs civil and industrial structures, and provides logistics services.
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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