Company Quarterly Earnings Update – HPG VN – 2020 9M

Summary of the 2020 9M results of Hoa Phat Group JSC (HPG VN)

9M/2020 results highlights:
  • In 9M/2020, HPG posted net revenue of VND64,340bn, higher than 40.8% y/y in same period last year. Steel and agricultural businesses are major segments, contributing 84.0% and 11.2% of total revenue, respectively. HPG’s total sales volume of long steel products reached 3.82 million tons (+94.5% y/y). All such increase in volume proceeded from new factory – Dung Quat steel complex (DQSC). In 9M/2020, the company sold 2.48 million tons of construction steel and exported 1.33 million tons of steel billet. China accounted for more than 60% of total sales volume of billet.
  • Meanwhile, Vietnam’s construction steel market had negative growth of 3.02% y/y due to week construction demand amidst prolonged impacts of COVID-19. As the lowest cost producer and market leader in Vietnam, HPG took over market share of other competitors by undercutting selling price of 3-5% versus its peers. HPG expanded its market share of construction steel to 32.6% in 9M/2020 from 25.0% in 9M/2019.
  • Gross margin improved from 18.3% in 9M/2019 to 19.6% in 9M/2020, mostly thanks to higher margin from the agricultural business. In contrast, the steel business continued to report lower gross margin as HPG continued to keep selling price low to capture market share. Net profit increased by 56.4% y/y to VND
  • By the end of 9M/2020, HPG had VND14,419bn in cash and cash equivalent, which accounted for 12.3% of total assets. Total debts amounted to VND45,252bn, translating into a moderate financial leverage, with D/E of 0.82x and D/A of 0.39x.
  • Construction activities and residential real-estate projects are projected to resume back on organic long-term growth track since 2021 as Covid-19’s impacts should be gradually mitigated, and new infrastructure projects will be kicked off. For HPG,
    we estimate that HPG would sell 4.0 million tons of construction steel (+11.5% y/y); 863K tons of steel pipe (+9% y/y); and 2.5 million tons of HRC (from minimal in 2020) in 2021.
  • All in all, net revenue is projected to grow 33.9% y/y to VND 124,629bn, and net profit is expected to advance by 45.6% y/y to VND16,351bn in 2021.

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