HPG – Earnings surge YoY from low base – Earnings Flash
  • 2024-05-02T00:00:00
  • Company Research

HPG released its Q1 2024 results that are consistent with the preliminary results announced in the company’s AGM on April 11, 2024, with net revenue of VND30.9tn (USD1.2bn; -10% QoQ, +16% YoY) and NPAT-MI of VND2.9tn (USD114.8mn; -3% QoQ, +622% YoY), fulfilling 22% and 29% of management’s respective full-year guidance, and 23% and 19% of our respective full-year forecasts.

Revenue continued to improve YoY from a low base: Q1 2024 revenue recovered by 16% YoY, driven by demand recovery across HPG’s steel product categories which supported both volume growth (details in Figure 2) and selling prices. 

GPM continued posting a strong performance: In Q1 2024, HPG's GPM rose by 50bps QoQ to 13.5%, continuing its upward trend for the fourth consecutive quarter and marking a substantial 720bps improvement YoY. This performance is attributed to the increase in selling prices of steel products amidst the declining cost of iron ore and coking coal, YTD.

Net financial expense narrowed 23% YoY: In Q1 2024, HPG’s total debt balance rose to VND77.5tn (USD3.1bn; +19% QoQ, +28% YoY). Nevertheless, financial expenses, most of which are interest expenses, declined 20% YoY, which we attributable to a lower-rate environment. A declining interest expense in Q1 2024 offset a 40% YoY increase in FX losses. HPG’s financial income declined 17% YoY, which we attribute to lower deposit rates as HPG’s cash balance largely stayed flat YoY at around VND35tn (USD1.4bn).

Overall, NPAT-MI expanded sixfold YoY due to higher sales and GPM. On a QoQ basis, HPG’s bottom line saw a modest 3% decline, despite a 10% drop in the top line, due to expanding GPM. As we expect for HPG’s steel business to continue to improve for the rest of 2024, we foresee insignificant change to our forecasts for HPG as stated in our last Update Report (dated February 19, 2024).

Figure 1: HPG’s Q1 2024 results

 

Q1 2023

Q4 2023

Q1 2024

QoQ

YoY

Vietcap's 2024F

Q1 as % of 2024F

Net revenue

26,589

34,384

30,852

-10%

16%

134,119

23%

        Steel

24,573

32,539

28,637

-12%

17%

124,881

23%

        Real estate

427

279

699

151%

64%

980

71%

           Agriculture

1,588

1,566

1,517

-3%

-4%

8,259

18%

Gross profit

1,676

4,472

4,154

-7%

148%

22,451

19%

SG&A expense

-757

-761

-958

26%

26%

-3,781

25%

EBIT

919

3,711

3,196

-14%

248%

18,670

17%

Financial income

903

732

752

3%

-17%

2,273

33%

Financial expenses

-1,331

-1,127

-1,061

-6%

-20%

-3,452

31%

Net other income/loss

40

69

374

442%

830%

142

263%

EBT

532

3,385

3,261

-4%

513%

17,633

18%

NPAT-MI

397

2,973

2,871

-3%

622%

15,066

19%

        Steel

357

2,760

2,413

-13%

576%

14,430

17%

        Real estate

143

121

273

125%

91%

312

87%

           Agriculture

-117

87

183

109%

N.M.

324

56%

GPM

6.3%

13.0%

13.5%



16.7%


SG&A exp./Sales

2.8%

2.2%

3.1%



2.8%


EBIT margin

3.5%

10.8%

10.4%



13.9%


NPAT-MI margin

1.5%

8.6%

9.3%

 

 

11.2%

 

Source: HPG, Vietcap’s forecast (last updated on February 19, 2024)

Figure 2: HPG’s Q1 2024 sales volume by steel products

HPG's sales volume (thousand tonnes)

Q1 2023

Q4 2023

Q1 2024

QoQ

YoY

Vietcap's 2024F

Q1 as % of 2024F

Construction steel

870

1,211

956

-21%

10%

4,167

23%

HRC

482

801

805

0%

67%

2,796

29%

Steel pipes

160

196

131

-33%

-18%

753

17%

Galvanized steel sheets

70

87

98

13%

40%

362

27%

Source: HPG, Vietcap’s forecast (last updated on February 19, 2024)

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