- We downgrade HPG to MARKET PERFORM from BUY despite inching up our target price by 2% to VND21,000/share as the company’s share price has rallied 39% over the last three months.
- Our higher target price is due to 1) our 2% increase in aggregate 2023-2027F NPAT-MI resulting from higher steel selling prices amid a recovery of global commodity prices and 2) lower WACC due to a higher projected effective tax rate as well as higher net cash at end-2022 vs end Q3-2022.
- Despite positive steel sales volume growth throughout 2022, HPG reported 2022 NPAT-MI of VND8.5tn (USD359.5mn; -75% YoY), with two consecutive quarterly losses in Q3-Q4 2022 (total net loss of VND3.8tn/USD159.6mn) due to strong corrections of both input and output prices.
- We trim our 2023F NPAT-MI by 1% to VND13.3tn (USD565.3mn; +57% YoY) as we expect a recovery in steel selling prices to be partially offset by 1) a YoY decline in 2023F sales volume amid weak demand in the domestic market and 2) higher input material prices pressuring margins.