- 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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