Result Update Report: HSG - Prolonged impact from flat steel market’s sluggish recovery
The lack of demand for GI/GL and steel pipes in both domestic and export markets will continue to put pressure on HSG's mid- to long-term business results, although profits may recover in the short term because of material price uptrend. Operating in both the manufacturing and retail segments, HSG has the advantage to be able to maintain stable selling prices but also faces pressure from the cost of maintaining a large retail system that erodes profits. FY 2022-2023 will be a difficult year for HSG, as the medium-term market outlook is the biggest obstacle to its endeavor to neutralize the loss of VND 680 billion reported in the first quarter. FCFF and P/B valuations determine HSG share price at VND 17,200, 15.1% higher than the closing price on April 21st, 2023. This upside implies that HSG's short-term business results may improve due to the recovery of HRC prices year-to-date as the construction peak season has started. HSG is having its 4th consecutive year not paying cash dividend. We have a ACCUMULATE view on the stock. We also recommend that investors monitor global HRC price and HSG’s sales volume closely to take advantage of possible trading opportunities in the short term and to assess investment rationales in the longer term.
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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