• We attended HPG’s annual general meeting (AGM) in Hanoi on April 11.
• Shareholders approved management’s guidance for 2024 NPAT of VND10.0tn (USD400.0mn; +47% YoY) vs our 2024 forecast of VND15.0tn (USD600.7mn; +120%YoY).
• Management shared the company’s positive preliminarily Q1 2024 result with NPAT of VND2.8tn (USD112mn; -6% QoQ, +631% YoY, completing 19% of our full-year 2024 forecast).  
• Other keypoints: 1) HPG has put its bauxite project on hold to focus on its steel business, especially with the Dung Quat 2 Steel Complex 2 project; 2) HPG is actively doing research for high-tech steel products for its long-term product expansion plan; 3) HPG is still pursuing the proposal for applying an anti-dumping tariff on hot-rolled-coil (HRC) imported from China.
• The shareholders approved HPG’s proposals for 1) not having a dividend for FY2023; 2) the FY2024 share bonus plan of 10% and FY2024 dividend of 10% either in cash or shares; 3) two additional members elected to the Board of Directors and one member of the Supervisory Board resigning; and 4) FY2023 and FY2024 fund allocation plan.

HPG’s 2024 earnings guidance is more conservative than our expectation. HPG set 2024 guidance for revenue at VND140tn (USD5.6bn; +18% YoY) and NPAT of VND10tn (USD400.0mn; +46% YoY). This guidance is equivalent to 104% and 67% of our respective forecasts for revenue and NPAT as stated in our last Update Report dated February 14, 2024. We note that HPG’s historical guidance leans more on the conservative side — with the exception of very abnormal market conditions in 2022-2023 as demonstrated in Figure 1. 

Figure 1: HPG’s actual and guidance for profit after tax

Source: HPG, Vietcap compilation. Note: * HPG revised 2015 PAT guidance from VND2,200bn to VND3,250bn in July 2015 after H1 2015 completed 83% of the company’s initial full-year earnings guidance.

Management shared positive preliminarily Q1 2024 results driven by demand recovery. Preliminarily Q1 2024 revenue was VND31.0tn (USD1.2bn; -10% QoQ, +17% YoY) and NPAT was VND2.8tn (USD112mn; -6% QoQ, +631% YoY, completing 19% of our full-year 2024 forecast). These earnings results already take into account approximately VND200bn (USD8.0mn) of FX losses.

Figure 2: HPG’s Q1 2024 and 2024F steel sales volume

Source: HPG, Vietcap

Updates on other businesses:

• HPG has put its bauxite project on hold to focus on its steel business, especially with the Dung Quat 2 Steel Complex 2 project. More details on HPG’s plan for bauxite can be found in our Bauxite – Aluminum Sector Report, dated October 2022.
• HPG is actively doing research for high-tech steel products for its long-term product expansion plan, which includes high-tech galvanized steel sheets used in mechanical work and steel for railroads and high-speed railroads.
• HPG is still pursuing the proposal for applying an anti-dumping tariff on hot-rolled-coil (HRC) imported from China. In March 2024, HPG and Formosa Ha Tinh made a proposal to Ministry of Industry and Trade (MoIT) to apply the anti-dumping tariff on HRC imported from China and India to protect local producers. If this proposal is passed, HPG and Formosa would be the key beneficiaries as HRC is outputs of these two companies. However, domestic galvanized steel producers including HSG and NKG will bear the risk of higher input material costs, as these companies need to import most of their HRC demand.

Changes in Board of Directors and Supervisory Board:

• Board of Directors: Elected two additional members:
  1. Mr. Chu Quang Vu: Previously hold different management positions in HPG’s group level and HPG’s subsidiaries before retiring in March 2021.
  2. Mr. Dang Ngoc Khanh: Currently is Chairman of Vinh Phat Investment JSC, Chairman of Megan Holdings JSC, and CEO of MSH Holdings. Mr. Khanh has more than 20 years in real estate sector and all three companies that Mr. Khanh currently holds key positions operates in real estate development and distribution. Notable projects of these three companies include Mandarin Garden (residential apartment complex – HPG is project developer, MSH Holdings is project distributor), Oceanami (resort in Ba Ria Vung Tau province – MSH Holdings is project distributor), DIC Victoria Hau Giang (commercial townhouse – 83.4ha – Megan Holdings is project distributor), Bac Duong Dong urban area (residential complex – 67ha – Vinh Phat is co-project owner).
• Supervisory Board: Ms. Le Minh Thuy resigned; the remaining members of HPG’s Supervisory Board consisted of three members and therefore by law does not require a replacement.

Dividend and fund allocation:

• FY2024 share bonus plan of 10% (each 10 shares owned will receive 1 new shares).
• No dividend to be paid for FY2023, which is in-line with our current assumption.
• FY2024 dividend plan of 10% either in cash or in shares. We currently assume no cash dividend for FY2024 as HPG is in heavy capex cycle for Dung Quat Steel Complex 2 in 2023-2025 period.
• FY2023 and FY2024 fund allocation scheme as in Figure 3.

Figure 3: HPG’s FY2023 and FY2024 fund allocation plan

Source: HPG, Vietcap compilation.

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