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Company Quarterly Earnings Update – HPG VN – Q4 2024
Summary of Q4/2024 results and outlook of Hoa Phat Group JSC (HPG VN)
- The global steel market encountered challenges as protectionist measures reshaped trade and pricing dynamics. Weak demand in China and excess steel exports depressed prices, though softened raw material costs and a stabilized logistics environment helped producers preserve profit margins. Meanwhile, Vietnam’s steel market sustained growth, supported by robust volumes in construction steel and hot-rolled coil (HRC), driven by significant public infrastructure investment, resilient manufacturing and industrial activities, and a gradual recovery in the property sector.
- HPG’s net revenue increased by 16.7% y/y, as strong volume growth and market share expansion helped offset lower selling prices. The steel segment, comprising 93.5% of total sales, saw volumes increase by 19.8% y/y to 9.3mn tons, with a 33.1% y/y surge in construction steel and billet sales, elevating HPG’s market share from 34.7% to 37.5%, supported by its cost-efficient production and extensive nationwide distribution network. HRC growth was modest at 4.6% y/y, as volumes approached full capacity. Gross margin improved to 13.3% from 10.9% in 2023, benefiting from a sharp reduction in input costs and heightened utilization. Net financial expenses fell by 33.2% y/y, despite substantial new borrowings for fixed asset investments, as interest rates declined. These factors drove a 75.9% y/y surged in net profit.
- The Vietnam Ministry of Industry and Trade (MoIT) has concluded its investigation concerning HRC imports, resulting in the imposition of temporary anti-dumping (AD) duties on HRC products sourced from China, with a formal decision anticipated in Q3/2025. HPG is well-positioned to leverage this development, bolstered by the addition of 5.6mn tons of HRC production capacity following the completion of the Dung Quat Steel Complex 2 (DQSC 2), which has commenced operations since Q1/2025. These duties will facilitate the sales of its expanded output by substantially curbing the influx of imported HRC. Furthermore, this measure is expected to spur a notable recovery of domestic selling prices, boosting HPG’s profitability.
- We project 2025 net profit to surge, propelled by a substantial increase in HRC volumes from new capacity and robust construction steel growth. The government’s focus on infrastructure development as a key GDP driver in 2025 is expected to boost demand for construction steel and flat steel products derived from HRC. Profit margins are also projected to improve as selling prices rise, supported by strong demand and the favorable impact of AD duties. Over the longer term, Vietnam’s ambitious railway and metro system plans present a compelling growth catalyst, heightening demand for high-strength steel rails while fostering further urbanization and property sector expansion, which requires ample steel.
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Featured image credit: https://www.hoaphat.com.vn/
