- We cut our target price by 17% to VND39,200/share due to a 10% decrease in our aggregate 2022-2026F NPAT-MI that is driven by pressure on margins from higher coal prices, a lower cash balance at end-Q2 2022, and a higher WACC due to a 50-bp increase in our risk-free rate assumption. 

- However, we maintain our BUY rating. HPG remains our top stock pick in Vietnam’s construction sector as a result of its market-leading position, established scale, proven operational efficiency, and ongoing capacity expansion and product diversification through the ramp-up of Dung Quat Steel Complex 1 (DQSC 1) and investment in DQSC 2. We forecast a 15% 2022-2026F NPAT-MI CAGR.

- HPG reported Q2 2022 NPAT-MI of VND4.0tn (USD173.1mn; -59% YoY and -51% QoQ). Despite the upbeat sales volume, Q2 2022 earnings were dragged by a narrower input-output price spread as 1) average selling prices (ASP) across steel products decreased throughout Q2 2022 and 2) coal input prices remained high.

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