HPG announced its Q1 2025 results with details as follows:

• Net revenue: VND37,6tn (USD1.48bn; +9% QoQ, +22% YoY; 23% of our 2025F forecast).
• NPAT-MI: VND3.344bn (USD131.1mn; +19% QoQ, +17% YoY; 22% of our 2025F forecast).
• Sales volume posted a strong Q1 performance, except for galvanized steel:
  • Construction steel: ~1,192,000 tonnes (+3% QoQ, +25% YoY; 24% of our 2025F forecast).
  • HRC: ~994,000 tonnes (+51% QoQ, +23% YoY; 22% of our 2025F forecast).
  • Steel pipes: ~186,000 tonnes (-9% QoQ, +42% YoY; 24% of our 2025F forecast).
  • Galvanized steel sheets: ~89,000 tonnes (-12% QoQ, -9% YoY; 20% of our 2025F forecast).
• We note that our current forecast has not factored in (1) the impact of the anti-dumping (AD) tariff against Chinese HRC (AD20), and (2) the impact from President Trump’s reciprocal tariff.

Strong Q1 top-line results, led by the steel and agriculture segments:

• Q1 2025 net revenue surged 22% YoY, driven by a 24% increase in steel sales and 31% growth in the agricultural segment, partially offset by a 71% YoY decline in real estate revenue. On a QoQ basis, revenue rose 9%, largely attributable to an 11% increase in steel sales. 
• Steel: The segment’s strong performance was mainly led by robust volume growth. Construction steel sales rose 3% QoQ – which is encouraging given that Q4 is typically the seasonal peak and Q1 is the low season - and 25% YoY, supported by a recovering real estate market, infrastructure investments, and exports to the US. HRC sales surged 51% QoQ and 23% YoY, benefiting from (1) the commercial launch of DQSC2 Phase 1 in March, and (2) the AD20 which took effect during the same month. We estimate that HRC utilization in March 2025 reached 106% (combined capacity of DQSC1 and DQSC2 Phase 1). We estimate steel’s blended ASP declined 4% QoQ (reflecting the normalization of prices after the temporary surge in Q4 2024 driven by China’s unprecedented monetary easing policy in late September 2024) and remained flat YoY.
• Agriculture: We think the strong result was mainly led by the pork segment. Per our understanding, Vietnam’s pork industry has been negatively affected by an outbreak of African Swine Fever (ASF) - leading to herd losses and higher market prices (due to lower supply). However, HPG’s strict biosecurity protocols helped maintain herd health and allowed the company to benefit from elevated pork prices.

Q1 GPM improved QoQ and YoY, driven by all three segments:

• Q1 2025 GPM improved to 14.4%, up from 13.5% in Q1 2024 and 12.7% in Q4 2024, supported by margin expansion across the steel, agriculture, and real estate segments. This conclusion is based on core NPAT-MI margin analysis, which excludes the one-off divestment gain recorded in Q1 2024 under “other income” – which was related to the steel segment.
• Core NPAT-MI margins by segment in Q1 2025:
  • Steel: 8.0% (vs 7.3% in Q1 2024 and 7.0% in Q4 2024), driven by higher utilization rates due to strong sales volume and favorable input costs. We note that HPG’s HRC prices did not immediately benefit from the AD20 ruling, as the first post-AD20 price hike of 3–4% only applies to April shipments onward.
  • Agriculture: 20.5% (vs 12.0% in Q1 2024 and 17.0% in Q4 2024), reflecting elevated pork prices amid ASF-induced supply shortages.
  • Real estate: 54.7% (vs 39.1% in Q1 2024 and 44.0% in Q4 2024).

Our comments:

• Based on the Q1 2025 results, we see potential upside to our full-year forecasts for HPG’s steel and agriculture segments, while the real estate segment may face downside risk, pending a further review. We consider steel performance strong, given (1) Q1 being a typical low season for construction steel sales, and (2) limited contribution from the AD20 tariff, which only took effect in March – the last month of the quarter. 
• Regarding the impact of US reciprocal tariffs on HPG, we see limited direct impact on HPG as (1) steel is not included in the reciprocal tariff list, (2) Vietnam continues to benefit from the US’s blanket 25% tariff on all steel imports, and (3) HPG’s exposure to the US is minimal (~1% of 2024 sales volume). 
• A more relevant consideration lies in indirect impact from weaker Chinese steel prices that could weigh on Vietnam’s domestic pricing. However, we are not overly concerned. Vietnam’s construction steel and HRC markets are now shielded by trade remedies against Chinese imports, meaning domestic prices may now follow the general direction of Chinese steel but with significantly reduced volatility. We have already observed this pattern in construction steel, and we expect HRC’s price will follow the same trend, following the implementation of AD20. Additionally, lower Chinese demand also drives down input costs, which should help preserve input-output spreads (i.e., margins) for HPG.

HPG’s Q1 2025 results

Source: HPG, Vietcap. *Core earnings exclude VND365bn (USD14.3mn) gain from steel-related asset divestment in Q1 2024, recorded under “Other income.” Though the breakdown of “Other income” is only disclosed in the H1 2024 audited FS, we attribute this gain to Q1 2024, as Q2 2024 “Other income” appears normal. Q1 2024 segment performance breakdown suggests that this divestment gain was associated with the steel segment. We apply the effective tax rate during Q1 2024 to calculate core earnings.

HPG’s Q1 2025 sales volume by steel products

Source: Vietnam Steel Association, Vietcap

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