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Company Quarterly Earnings Update – HPG VN – 9M 2024
Summary of 9M/2024 results and outlook of Hoa Phat Group JSC (HPG VN)
- The steel sector recorded a 14.5% y/y volume increase to 23.2mn tons. Growth was driven by a rebound in domestic demand, particularly for Hot-Rolled Coil (HRC), which surged 31.7% y/y. Rising global protectionism prompted steel exporter to shift their sourcing to locally produced HRC to enhance local content and qualify for more favorable tariff treatment. Construction steel also demonstrated robust growth, driven by increased infrastructure spending on large-scale government projects.
- In 9M/2024, HPG’s net revenue surged 23.4% y/y as robust volume growth was bolstered by market share expansion. The steel segment, representing 93.8% of total sales, saw a 29.8% y/y volume increase to 6.9mn tons. This growth was largely driven by construction steel and billet, which surged 45.4% y/y. HPG has rapidly gained market share, leveraging its deep production cost advantage and extensive nationwide distribution network. HRC also posted solid growth at 14.4% y/y, achieving 100.0% utilization. Gross margin improved to 13.5% from 10.0% in 9M/2023, driven by sharp reduction in input costs as global supply chain disruptions eased. These factors collectively contributed to a 140.4% y/y rebound in net profit, reaching VND 9.2tn.
- For Q4/2024, net profit is projected to be supported by solid sales volumes and further margin expansion. We anticipate the utilization rate to remain near full capacity, fueled by strong domestic demand thanks to ramping up infrastructure spending and an accelerating real estate market rebound. Profit margins are set to improve further, driven by a significant upswing in steel prices since early October, following China’s announcement of a series of stimulus measures.
- The Vietnam Ministry of Industry and Trade (MOIT) is expected to soon announce the results of its investigation, with anti-dumping (AD) measures anticipated to be imposed on imported HRC products. HPG is strategically positioned to capitalize on this development with the upcoming addition of HRC capacity upon the completion of the Dung Quat Steel Complex 2 (DQSC 2) by Q4/2024. Furthermore, with the government’s emphasis on infrastructure development as a major GDP growth driver for the coming year, demand for both construction steel and flat steel products derived from HRC is expected to grow substantially, bolstering its sales outlook.
- For 2025, we anticipate HPG to maintain near-full utilization of its existing capacity while an anticipated 35.0% initial utilization of the DQSC 2 helps drive the volume growth. Additionally, we foresee a robust increase in public investment, revival in new housing projects, and the impact of AD tax driving up selling prices and therefore gross margin to improve.
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Featured image credit: https://www.hoaphat.com.vn/
