- 2024-10-31T00:00:00
- Company Research
HPG announced its 9M 2024 results with net revenue of VND104.4tn (USD4,175mn; +23% YoY; 79% of our 2024F forecast) and NPAT-MI of VND9.2tn (USD368.4mn; +1.4x YoY; 75% of our 2024F forecast). In Q3 2024, net revenue was VND34tn (USD1,358mn; -14% QoQ, +19% YoY) and NPAT-MI was VND3tn (USD120.9mn; -9% QoQ, +50% YoY).
- Robust 9M 2024 top-line performance driven by strong recovery in steel sales volume: 9M 2024 net revenue surged 23% YoY to VND97.9tn (USD3.9bn; 80% of our 2024F forecast), mostly driven by 23% YoY growth of the steel segment. According to the Vietnam Steel Association, 9M 2024 sales volume of HPG’s construction steel was 3.3mn tonnes (robust growth of 29% YoY; 70% of our 2024F forecast), and sales volume of HRC was 2.3mn tonnes (+14% YoY; 77% of our 2024F forecast). QoQ-wise, steel revenue dropped 17% QoQ as construction steel sales volume slowed 14% QoQ, while HRC sales volume inched up 2% QoQ, implying a QoQ decline in ASP during the quarter – which we attribute to weak steel prices during Q3 2024 due to pressure from the Chinese steel market.
The real estate segment recorded stronger-than-expected 9M 2024 net revenue which completes 88% of our 2024F forecast, driven by a strong Q3 result of VND768bn (USD30.7mn; +4.7x QoQ, +11x YoY). This offset weaker-than-expected performance of the agriculture segment, with the 9M result fulfilling only 69% of our forecast.
- Q3 GPM expanded YoY, yet steel margins narrowed QoQ: Q3 GPM expanded QoQ to 13.9% from 13.3%, which we attribute to a higher sales contribution from the two higher-margin segments, namely real estate and agriculture (Q4 2024 NPAT-MI margin of the real estate/agriculture segments were 39.3%/15.3%, vs the steel segment’s 7.8%). Steel NPAT-MI margin dropped QoQ to 7.8% from 8.0%, which we attribute to weaker sales volume QoQ leading to higher fixed cost per unit sold QoQ. We note that input prices (mainly iron ore and hard coking coal) dropped faster vs output prices (mainly construction steel and HRC) during Q3 2024, and HPG recorded no inventory provision expense in Q3 2024.
Overall, we foresee slight upside potential to our NPAT-MI forecast as the 9M result fulfills 75% of our current projection, with slightly better-than-expected steel earnings (achieving 74%) and strong performance of the real estate segment (achieving 87%), pending a fuller review. We expect stronger QoQ earnings in Q4 2024 due to higher steel sales volume, driven by the year-end high season for construction activities, especially for infrastructure development. This, in turn, should boost margins via increased sales volume. Additionally, as 9M steel net revenue tracks ahead of our forecast, while sales volume trails, we foresee upside potential to our current ASP projection.
HPG’s 9M 2024 results
VNDbn | Q3 2023 | Q2 2024 | Q3 2024 | QoQ | YoY | 9M 2023 | 9M 2024 | YoY | 2024F | 9M as % of 2024F |
Net revenue | 28,484 | 39,556 | 33,956 | -14% | 19% | 84,569 | 104,364 | 23% | 131,959 | 79% |
Steel | 26,901 | 37,879 | 31,355 | -17% | 17% | 79,330 | 97,871 | 23% | 123,055 | 80% |
Real estate | 64 | 134 | 768 | 473% | 1,099% | 654 | 1,601 | 145% | 1,819 | 88% |
Agriculture | 1,519 | 1,542 | 1,833 | 19% | 21% | 4,586 | 4,892 | 7% | 7,085 | 69% |
Gross profit | 3,595 | 5,247 | 4,731 | -10% | 32% | 8,466 | 14,133 | 67% | 18,952 | 75% |
SG&A expense | -879 | -1,136 | -1,042 | -8% | 19% | -2,508 | -3,135 | 25% | -3,805 | 82% |
EBIT | 2,716 | 4,112 | 3,689 | -10% | 36% | 5,958 | 10,997 | 85% | 15,147 | 73% |
- Financial income | 851 | 645 | 528 | -18% | -38% | 2,494 | 1,925 | -23% | 3,139 | 61% |
- Financial expenses | -1,438 | -1,065 | -833 | -22% | -42% | -4,118 | -2,959 | -28% | -4,314 | 69% |
Net other income/loss | 46 | 42 | 27 | -34% | -41% | 73 | 443 | 506% | 442 | 100% |
EBT | 2,174 | 3,733 | 3,412 | -9% | 57% | 4,408 | 10,407 | 136% | 14,413 | 72% |
NPAT | 2,000 | 3,320 | 3,022 | -9% | 51% | 3,831 | 9,210 | 140% | 12,251 | 75% |
NPAT-MI | 2,005 | 3,319 | 3,023 | -9% | 51% | 3,862 | 9,213 | 139% | 12,315 | 75% |
Steel | 1,810 | 3,032 | 2,438 | -20% | 35% | 3,509 | 7,884 | 125% | 10,628 | 74% |
Real estate | 34 | 62 | 302 | 386% | 778% | 229 | 637 | 178% | 734 | 87% |
Agriculture | 156 | 225 | 281 | 25% | 80% | 93 | 689 | 639% | 954 | 72% |
GPM | 12.6% | 13.3% | 13.9% |
|
| 10.0% | 13.5% |
| 14.4% |
|
SG&A exp./Sales | -3.1% | -2.9% | -3.1% |
|
| -3.0% | -3.0% |
| 2.9% |
|
EBIT margin | 9.5% | 10.4% | 10.9% |
|
| 7.0% | 10.5% |
| 11.5% |
|
NPAT-MI margin | 7.0% | 8.4% | 8.9% |
|
| 4.6% | 8.8% |
| 9.3% |
|
Steel | 6.7% | 8.0% | 7.8% |
|
| 4.4% | 8.1% |
| 8.6% |
|
Real estate | 53.7% | 46.4% | 39.3% |
|
| 35.0% | 39.8% |
| 40.4% |
|
Agriculture | 10.3% | 14.6% | 15.3% |
|
| 2.0% | 14.1% |
| 13.5% |
|
Source: HPG, Vietcap
HPG’s 9M 2024 sales volume by steel products
Thousand tonnes | Q3 2023 | Q2 2024 | Q3 2024 | QoQ | YoY | 9M 2023 | 9M 2024 | YoY | 2024F | 9M as % of 2024F |
Construction steel | 921 | 1,271 | 1,096 | -14% | 19% | 2,575 | 3,323 | 29% | 4,735 | 70% |
HRC | 766 | 723 | 739 | 2% | -4% | 1,982 | 2,268 | 14% | 2,936 | 77% |
Steel pipes | 193 | 188 | 185 | -1% | -4% | 488 | 504 | 3% | 685 | 74% |
Steel sheets | 65 | 124 | 123 | -1% | 88% | 241 | 345 | 43% | 428 | 81% |
Source: Vietnam Steel Association, Vietcap
Steel-related commodities prices
% Change | YTD | MTD | Sep 24* to date | YTD average YoY |
Inputs |
|
|
|
|
Scrap | -15.8% | 2.4% | 6.7% | -9.6% |
Hard coking | -37.4% | 9.3% | 11.0% | -13.1% |
Iron ore | -27.5% | -4.3% | 6.8% | -6.3% |
Outputs |
|
|
|
|
Chinese HRC | -10.6% | -2.1% | 12.0% | -8.2% |
Vietnam HRC | -13.6% | 5.0% | 10.6% | -10.8% |
China domestic rebar | -14.3% | 1.3% | 1.4% | -4.9% |
HPG's construction steel | -1.4% | 2.7% | 2.7% | -4.9% |
Chinese galvanized steel | -11.0% | 4.0% | 4.0% | -10.0% |
Source: Bloomberg, Vietcap. *Note: Sep 24 was the day when China's central bank announced aggressive monetary stimulus packages which positively impacted commodities prices.
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