BUSINESS ACTIVITIES RECOVER AFTER THE CRISIS

Production and consumption volumes show strong growth compared to the same period last year. In 3Q, HPG's production volume increased by 6.4% YoY, with a cumulative growth of 34% YoY in the first nine months of the year. Consumption of construction steel and hot-rolled coil (HRC) also grew by 29.2% and 19.2% YoY, respectively, driven by positive recovery signals from the market. 

Profit margins remain stable. Despite synchronized movements in steel selling prices and input material costs, HPG maintained profitability levels within the range of 12.5%–14% over the past five quarters. This demonstrates the company's ability to leverage its leading industry position to flexibly adjust selling prices and mitigate market risks.

Nine-month cumulative results: Revenue: VND 104,364 billion (+23.4% YoY), net profit after tax: VND 9,210 billion (+140.4% YoY), EBITDA: VND 16,918 billion (+38.2% YoY), EBITDA margin: 16.21% (compared to 14.48% in the same period of 2022).

Business Outlook for 2024:

• Exports face challenges, focus shifts to domestic market. We anticipate that HPG's export activities will encounter significant barriers due to the global wave of trade protectionism. The domestic market is expected to become the main growth driver, supported by: (1) recovering domestic consumption, (2) a warming real estate sector bolstered by policy support, (3) opportunities to increase sales through participation in key public investment projects, and (4) the potential implementation of anti-dumping duties by the Ministry of Industry and Trade on hot-rolled coil (HRC) products originating from China and India.
• HRC production to continue growing as Phase 1 of the Dung Quat 2 project enters production. Phase 1 of the Dung Quat 2 project will commence trial operations at the end of 2024 and is expected to be fully operational by late 2025. This development is projected to drive HRC production growth for HPG in the coming year.
• Expectations for anti-dumping investigation results. Preliminary results of the ongoing investigation are anticipated to be announced by the end of November. If trade protection measures are enacted, we expect increased market transparency in the domestic steel industry and stabilization of steel selling prices in the near future.

We recommend a BUY for HPG stock with a 12-month target price of VND 29,900 per share (Upside 16.9%).