HPG [UNDERPERFORM -11.8%] - Slow demand recovery limits earnings growth; full valuation

- We downgrade HPG to UNDERPERFROM from MARKET PERFORM and cut our target price by 7% to VND19,500/share. HPG’s share price has increased 9% over the last three months and 13% YTD amid market expectations for a YoY earnings recovery on higher sales volume and ASPs.

- Our lower target price is due to our 16% lower aggregate 2023-2027F NPAT-MI (2023F/24F/25F/26F/27F NPAT-MI cut by 32%/24%/13%/11%/10%, respectively) resulting from lower sales volume and selling price forecasts across product categories. This is partially offset by rolling our TP horizon forward from end-2023 to mid-2024.

- Despite reporting modest net profit of VND397bn (USD16.8mn) in Q1 2023 thanks to the reversal of inventory provision (VND947bn/USD40.3mn), HPG’s construction sales volume was weaker than our expectation. Additionally, the sluggish demand outlook and declining domestic steel selling prices prompt our 32% cut in 2023F NPAT-MI to VND9.1tn (USD387.1mn; +8% YoY).