Company Quarterly Earnings Update – HPG VN – Q2 2022

Summary of the Q2/2022 results of Hoa Phat Group JSC (HPG VN)

H1/2022 results highlights

  • In H1/2022, steel consumption in Vietnam contracted slightly (construction steel -1.6% y/y, steel pipes -8.0% y/y) due to weak construction demand amid rising material prices. Meanwhile, HPG still achieved growth, asserting its leading position in construction steel and steel pipes with market shares of 41% and 36%, respectively.
  • HPG’s net revenue grew by 22.9% y/y to VND81.5 trillion, driven by a growth of 29.6% y/y in construction steel volume, and an increase of 7.0% y/y in hot-rolled-coil (HRC) volume coupling with higher selling prices. However, the gross margin narrowed 9.2 percentage points to 20.4% as rising input costs outpaced selling prices. Net financial expenses jumped due to FX losses as a result of loan revaluation due to the USD appreciation. Overall, net profit decreased 26.6% y/y, reaching VND12.2 trillion.
  • By the end of Q2, HPG had VND44.8 trillion in cash/cash balance. Total debts amounted to VND70.0 trillion, of which USD loans accounted for 40%, mostly as short-term loans. Financial leveraging was moderate with a D/E ratio of 0.70x and a D/A ratio of 0.34x.


  • Since the peak in Q2/2022, steel prices have dropped sharply by 16.2% for construction steel and by 35.1% for HRC. That hindered distributors and constructors from stockpiling steel, resulting in sluggish short-term demand. We don’t expect significant improvement in construction steel demand in Vietnam until the last quarter. For HRC, which are further processed for some export products may continue to suffer from weak demand in US and EU markets. In addition, the currently weak real estate market in China is dampening steel demand globally, indirectly softening the profit margin of the global steel industry, including HPG’s HRC business.
  • Price of coking coal, a major input material, has dropped by half since May, which will support the profitability of HPG, but from Q4/2022 onwards due to the 3-month inventory cycle. Steel demand is expected to recover slower than our last forecast, while HPG’s profit margin may suffer in the third quarter. However, the demand will return to its long-term growth pattern from 2023 onwards thanks to the resumption of delayed construction projects, a solid real estate market, and growing need for infrastructure development. We revise our previously forecast net profit down by 20.8% to VND16.0 trillion (-53.5% y/y) for 2022 and by 6.1% to VND24.7 trillion (+54.3% y/y) for 2023.


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