Company Quarterly Earnings Update – HPG VN – Q1 2022

Summary of the Q1/2022 results of Hoa Phat Group JSC (HPG VN)

Q1/2022 results highlights

  • HPG ran its facilities at full capacity and reported strong growth in the total sales volume of 15.2% y/y, including a growth of 57.1% y/y from construction steel, 18.4% y/y from steel pipes, and 14.6% y/y from hot-rolled coils (HRCs), while billet sales were down 83.2% y/y due to greater internal usage. HPG’s growth outpaced the industry average and asserted its leading position in construction steel and steel pipes.
  • Net revenue advanced by 41.3% y/y to VND44.0 trillion, driven by volume growth and higher selling prices. The operating margin was 21.0%, which normalized from a historic high of 24.3% in Q1/2021. Operating profit increased by 22.5% y/y, while net profit posted a smaller growth of 17.8% y/y to VND8.2 trillion due to lower financial income.
  • By the end of March, HPG had accumulated VND46.3 trillion in cash/cash equivalent and short-term investment, accounting for 24.9% of total assets. Financial leveraging was moderate with a D/E ratio of 0.61x and a D/A ratio of 0.32x.


  • We keep a positive long-term view for HPG thanks to the solid development of the construction sector, which is supported by the rising demand for housing and infrastructure development. The construction of HPG’s Dung Quat Steel Complex 2 (DQSC 2) started in May 2022 and is expected to be completed in 2024. With DQSC2’s added capacity, HPG’s total crude steel capacity will increase by 65.8% to 14.1 million tons. In the short-term, however, we foresee HPG experiencing some unfavorable business conditions: (i) disbursement in many infrastructure projects are delayed due to high input prices and waiting for authority approval for budget adjustments; (ii) China’s Zero COVID policy causing low steel demand globally amid high input materials prices, stressing the profit margin of the steel business in general and HPG in particular.
  • Compared to our previous projection, we maintain our view that HPG’s facility will continue to operate at full capacity. Its revenue will be solely driven by the selling prices over 2022-2023 before DQSC 2 comes into operation from 2024. HPG’s margin is projected to narrow over the remaining quarters of 2022 before normalizing from 2023 onwards. As a result, we revise down our forecasted net profit by 13.6% to VND20.2 trillion (-41.3% y/y) for 2022 and by 6.6% to VND26.3 trillion (+30.1% y/y) for 2023. For 2024-2026, we revise net profit up by 8.4%, 16.8% and 23.5% respectively, thanks to the additional capacity of DQSC 2.


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