- 2024-08-01T00:00:00
- Company Research
HPG announced its H1 2024 results with net revenue of VND70.4tn (USD2.8bn; +26% YoY; 54% of our 2024F forecast) and NPAT-MI of VND6.2tn (USD243mn; +120% YoY; 41% of our 2024F forecast). In Q2 2024, net revenue was VND39.6tn (USD1.6bn; +28% QoQ, +34% YoY) and NPAT-MI was VND3.3tn (USD129mn; +16% QoQ, +127% YoY).
- Robust H1 2024 top line performance driven by strong recovery in steel sales volume: H1 2024 revenue surged 26% YoY, mostly driven by 27% YoY growth of the steel segment (90%+ of total revenue). We attribute the strong H1 performance of the steel segment to a recovery in sales volume, with the two most important products, construction steel and HRC, growing 35% YoY and 26% YoY, respectively. The strong rebound in sales volume is due to (1) a gradual recovery in demand from last year’s low base, and (2) HPG gaining market share in the construction steel segment (H1 2024 market share of 38.2%, vs 34.5% in 2023). However, YoY sales volume growth outpaced net revenue growth, indicating a decline in the steel ASP - attributed to (1) a still-weak domestic real estate market pressuring both input material prices and steel selling prices, and (2) increased competition from low-priced Chinese steel imports.
- H1 GPM expanded YoY: In H1 2024, HPG’s GPM expanded to 13.4% from H1 2023’s low base of 8.7% despite lower YoY ASP, attributed to (1) low input material prices due to sluggish demand from China, and (2) a higher factory utilization rate as volume recovered, reducing unit COGS. Q2 2024 GPM also expanded YoY to 13.3% from 10.8%.
- Q2 financial income and expense both declined YoY: Financial income declined 13% YoY in Q2 2024, as interest income (80%/45% of Q2 2023/Q2 2024 total financial income, respectively) declined 50% YoY. This was due to (1) a lower average cash balance to fund DQSC2 capex, at VND31.4tn (USD1.2bn) during Q2 2024, vs VND35.7tn (USD1.4mn) during Q2 2023, and (2) a lower-rate environment. Q2 financial expense declined 21% YoY as interest expense (respective 75%/50% of Q2 2023/Q2 2024 financial expense) declined 45%, attributed to lower interest rates as the average debt balance expanded to VND75.2tn (USD2.9bn) during Q2 2024 from VND60.6tn (USD2.4bn) during Q2 2023.
Overall, as H1 2024 net revenue and NPAT-MI met 54% and 41% of our respective 2024F forecasts, we foresee a slight downside risk to our NPAT-MI forecast, though we expect demand to recover stronger in H2 2024 vs in H1.
HPG’s H1 2024 results
VNDbn | Q2 2023 | Q1 2024 | Q2 2024 | QoQ | YoY | H1 2023 | H1 2024 | YoY | 2024F | H1 as % of 2024F |
Net revenue | 29,496 | 30,852 | 39,556 | 28% | 34% | 56,085 | 70,408 | 26% | 130,878 | 54% |
Steel | 27,856 | 28,637 | 37,879 | 32% | 36% | 52,429 | 66,516 | 27% | 120,504 | 55% |
Real estate | 162 | 699 | 134 | -81% | -17% | 590 | 833 | 41% | 1,772 | 47% |
Agriculture | 1,478 | 1,517 | 1,542 | 2% | 4% | 3,066 | 3,059 | 0% | 8,602 | 36% |
Gross profit | 3,195 | 4,154 | 5,247 | 26% | 64% | 4,871 | 9,401 | 93% | 22,146 | 42% |
SG&A expense | -871 | -958 | -1,136 | 19% | 30% | -675 | -2,094 | 210% | -3,773 | 55% |
EBIT | 2,324 | 3,196 | 4,112 | 29% | 77% | 4,196 | 7,308 | 74% | 18,372 | 40% |
- Financial income | 740 | 752 | 645 | -14% | -13% | 1,644 | 1,397 | -15% | 3,104 | 45% |
- Financial expenses | -1,349 | -1,061 | -1,065 | 0% | -21% | -2,679 | -2,126 | -21% | -4,231 | 50% |
Net other income/loss | -13 | 374 | 42 | -89% | -418% | 27 | 415 | 1437% | 442 | 94% |
EBT | 1,702 | 3,261 | 3,733 | 14% | 119% | 3,188 | 6,994 | 119% | 17,688 | 40% |
NPAT | 1,448 | 2,869 | 3,320 | 16% | 129% | 2,785 | 6,189 | 122% | 15,035 | 41% |
NPAT-MI | 1,460 | 2,871 | 3,319 | 16% | 127% | 2,812 | 6,190 | 120% | 15,113 | 41% |
Steel | 1,342 | 2,413 | 3,032 | 26% | 126% | 1,699 | 5,445 | 220% | 13,796 | 39% |
Real estate | 52 | 273 | 62 | -77% | 21% | 195 | 335 | 72% | 680 | 49% |
Agriculture | 54 | 183 | 225 | 24% | 318% | -63 | 408 | -752% | 638 | 64% |
GPM | 10.8% | 13.5% | 13.3% |
|
| 8.7% | 13.4% |
| 16.9% |
|
SG&A exp./Sales | -3.0% | -3.1% | -2.9% |
|
| -1.2% | -3.0% |
| -2.9% |
|
EBIT margin | 7.9% | 10.4% | 10.4% |
|
| 7.5% | 10.4% |
| 14.0% |
|
NPAT-MI margin | 4.9% | 9.3% | 8.4% |
|
| 5.0% | 8.8% |
| 11.5% |
|
Steel | 4.8% | 8.4% | 8.0% |
|
| 3.2% | 8.2% |
| 11.4% |
|
Real estate | 31.8% | 39.1% | 46.4% |
|
| 33.0% | 40.3% |
| 38.3% |
|
Agriculture | 3.7% | 12.0% | 14.6% |
|
| -2.0% | 13.3% |
| 7.4% |
|
Source: HPG, Vietcap
HPG’s H1 2024 sales volume by steel products
Thousand tonnes | Q2 2023 | Q1 2024 | Q2 2024 | QoQ | YoY | H1 2023 | H1 2024 | YoY | 2024F | H1 as % of 2024F |
Construction steel | 785 | 956 | 1,271 | 33% | 62% | 1,654 | 2,228 | 35% | 4,167 | 53% |
HRC | 734 | 806 | 723 | -10% | -1% | 1,216 | 1,529 | 26% | 2,796 | 55% |
Steel pipes | 135 | 131 | 188 | 43% | 39% | 295 | 319 | 8% | 753 | 42% |
Steel sheets | 106 | 98 | 124 | 27% | 17% | 176 | 222 | 26% | 362 | 61% |
Source: Vietnam Steel Association, Vietcap
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