- 2025-04-23T00:00:00
- Company Research
HSG announced its H1 FY2025 results as follows:
H1 FY2025:
- Net revenue: VND18.7tn (USD732.3mn; +2% YoY; 46% of our FY2025 forecast).
- NPAT-MI: VND371bn (USD14.5mn; -12% YoY; 74% of our FY2025 forecast).
Q2 FY2025:
- Net revenue: VND8.5tn (USD331.4mn; -17% QoQ; -9% YoY).
- NPAT-MI: VND205bn (USD8.1mn; +24% QoQ; -36% YoY). This figure is two times higher than the ~VND100bn (USD3.9mn) figure shared during the AGM hosted in March.
Revenue remained stable during H1 FY2025, with domestic sales offsetting a decline in exports: H1 FY2025 net revenue rose modestly by 2% YoY, supported by a 3% increase in total sales volume of steel sheets and pipes—implying largely flat ASPs. Export volume fell 19% YoY, reflecting growing protectionism and heightened competition from Chinese steel in exports markets, while robust domestic demand (+26% YoY) helped offset the export shortfall. In Q2 FY2025, revenue declined 17% QoQ and 9% YoY, closely tracking a 16% QoQ and 6% YoY drop in sales volume. This suggests ASPs held steady QoQ but declined ~3% YoY.
Q2 GPM was temporarily boosted by a one-off inventory reversal gain: Q2 FY2025 GPM improved to 12.7% (from 11.8% in Q1 and 12.1% YoY), despite soft sales volume and weak steel prices during the quarter. The margin expansion was driven by a VND145bn (USD5.7mn) inventory reversal, attributed to low-cost inventory purchased before the anti-dumping (AD) tariff on Chinese HRC (AD20) that took effect in March. Excluding this, underlying GPM would have been 11.0%, down both QoQ and YoY. For H1 FY2025, GPM improved to 12.2% from 11.3% YoY. However, excluding all inventory provision bookings (during H1 FY2024) and reversals (during H1 FY2025), the adjusted H1 FY2025 GPM was 11.3%, down from 11.8% in H1 FY2024.
High Q2 SG&A, driven by higher salary expenses outweighing lower shipping costs: Q2 FY2025 SG&A/Sales increased to 10.7% (vs 9.7% in Q1 and 9.9% YoY), mainly due to higher salary expenses (36% of total Q2 SG&A), which rose 14% QoQ and 22% YoY—likely due to the expansion of the Hoa Sen Home retail chain. This offset a sharp decline in shipping expenses (21% of SG&A), down 37% QoQ and 43% YoY on weaker exports and lower freight rates. H1 SG&A/Sales reached 10.2%, above our full-year forecast of 9.5%.
Net FX gains temporarily support Q2 earnings: In Q2 FY2025, HSG recorded a net FX gain of VND96bn (USD3.8mn; +4.7x QoQ, -22% YoY), which supported NPAT-MI of VND205bn (USD8.0mn; +24% QoQ, -36% YoY), despite a weaker operating profit of VND168bn (USD6.6mn; -22% QoQ, -18% YoY).
Our comments:
Overall, while HSG’s Q2 FY2025 NPAT-MI doubled the preliminary guidance shared at the March AGM, we remain cautious about the quality of earnings. The combined impact of one-off gains—inventory reversal, and net FX gain totaled VND241bn (USD9.5mn), exceeding the reported NPAT-MI of VND205bn (USD8.1mn) itself.
Although H1 FY2025 NPAT-MI reached 74% of our full-year forecast, we see insignificant changes to our forecast as challenges are mounting for H2, pending a fuller review. These include (1) higher input costs - following the implementation of AD20 tariffs on Chinese HRC in March 2025 and (2) the EU’s new quota on galvanized steel imports from Vietnam taking effect from April 2025 – estimated to halve Vietnam’s export volumes to the region (the EU accounted for 30-35% of Vietnam’s galvanized steel exports in 2024, and 30% of HSG’s total galvanizeed steel exports in FY2024). One positive factor could be the AD tariffs on Chinese and South Korean galvanized steel (AD19). While this alleviates much of the pressure from imported steel, we see limited room for price increases due to higher competition in an already oversupplied domestic market as a result of redirected exports.
HSG’s H1 FY2025 results
VND bn | Q2 | Q1 | Q2 | QoQ | YoY | H1 | H1 | YoY | FY25F | H1 FY25/ |
Steel sales volume (‘000 tonnes) | ||||||||||
Total | 446 | 500 | 421 | -16% | -6% | 895 | 920 | 3% | 1,906 | 48% |
Exports | 266 | 217 | 166 | -24% | -38% | 470 | 383 | -19% | 765 | 50% |
Domestic | 180 | 282 | 255 | -10% | 42% | 425 | 537 | 26% | 1,141 | 47% |
Net revenue | 9,248 | 10,222 | 8,452 | -17% | -9% | 18,321 | 18,674 | 2% | 40,669 | 46% |
Gross profit | 1,117 | 1,205 | 1,076 | -11% | -4% | 2,067 | 2,281 | 10% | 4,454 | 51% |
SG&A expenses | -913 | -991 | -908 | -8% | -1% | -1,752 | -1,900 | 8% | -3,864 | 49% |
Operating profit | 204 | 214 | 168 | -22% | -18% | 314 | 382 | 21% | 591 | 65% |
Net interest income/(expense) | -28 | -49 | -45 | -8% | 57% | -53 | -93 | 75% | -120 | 78% |
Net FX gain/loss | 124 | 17 | 96 | 466% | -22% | 144 | 113 | -21% | 61 | 186% |
Other gain/loss | 14 | 7 | 8 | 16% | -43% | 24 | 14 | -40% | 39 | 36% |
PBT | 313 | 189 | 227 | 20% | -27% | 428 | 416 | -3% | 571 | 73% |
Tax expenses | 6 | -23 | -22 | -7% | -485% | -6 | -45 | 633% | -69 | 66% |
NPAT-MI | 319 | 166 | 205 | 24% | -36% | 422 | 371 | -12% | 502 | 74% |
GPM | 12.1% | 11.8% | 12.7% |
|
| 11.3% | 12.2% |
| 11.0% |
|
SG&A exp./Sales | 9.9% | 9.7% | 10.7% |
|
| 9.6% | 10.2% |
| 9.5% |
|
OPM | 2.2% | 2.1% | 2.0% |
|
| 1.7% | 2.0% |
| 1.5% |
|
Effective tax rate | -1.8% | 12.4% | 9.6% |
|
| 1.4% | 10.9% |
| 12.0% |
|
NPM | 3.4% | 1.6% | 2.4% |
|
| 2.3% | 2.0% |
| 1.2% |
|
Source: HSG, Vietcap. Note: HSG’s financial year (FY) ends on September 30.
Powered by Froala Editor