- 2024-04-27T00:00:00
- Company Research
- HSG released its preliminary Q2 FY2024 results with net revenue of VND9.2tn (USD368mn; +2% QoQ, +32% YoY) and NPAT-MI of VND319bn (USD12.7mn; +209% QoQ, +25% YoY). We note that FY refers to financial year, and that HSG’s FY end is September 30.
- Robust YoY but flat QoQ quarterly sales growth: In Q2 FY2024, HSG posted robust 32% YoY sales growth from Q2 FY2023’s low base, driven by a strong YoY rebound in exports demand and a moderate recovery in domestic construction activities. However, on a QoQ basis, sales only grew by 2%.
- Quarterly GPM narrowed YoY, yet expanded QoQ: YoY, GPM in Q2 FY2024 decreased by 130bps, as steel prices remained stable over the past three months due to weak demand from China, contrasting with the previous year's rising prices due to optimism for a strong rebound in China which never materialized. However, GPM expanded by 160bps QoQ, attributed to wider spreads between galvanized steel products and HRC input prices. YTD, HRC input prices have mostly remained flat due to sluggish construction demand from China, while output ASPs have recovered moderately, supported by both domestic and exports demand recovery. This dynamic aligns with our expectation for Vietnam’s steel sector 2024F GPM, as stated in our Vietnam 2024 Strategy report at the beginning of this year.
- Quarterly SG&A expenses surged YoY: Q2 FY2024 SG&A expenses rose by 42% YoY, driven by a 142% surge in exports expenses (22% of total Q2 FY2023’s SG&A) and a 55% rise in salary expenses (27% of the total of Q2 FY2023’s SG&A). We believe the rise in exports expenses was due to the recent hike in global freight rates because of the Red Sea tension and a severe drought in the Panama Canal.
- We note that HSG recorded an abnormally high net FX gain of VND124bn (USD5mn) in Q2 FY2024, which surpassed its full-FY2023 net gain of VND113bn (USD4.5mn). HSG has yet to provide further explanations for this gain.
Overall, with the above dynamics, Q2 FY2024 NPAT-MI doubled QoQ. However, 1H FY2024 sales and NPAT-MI only met 33% and 27% of our prior FY2024F forecasts, respectively, suggesting potential downside risks to future projections.
HSG’s 1H FY2024’s results
VND bn | Q2 FY2023 | Q1 FY2024 | Q2 FY2024 | Q2 FY24 QoQ | Q2 FY24 YoY | 1H FY2023 | 1H FY2024 | 1H FY24 YoY | FY2024F Old | 1H as % of FY2024F |
Revenue | 6,981 | 9,073 | 9,248 | 2% | 32% | 14,898 | 18,321 | 23% | 55,364 | 33% |
Gross profit | 934 | 950 | 1,117 | 18% | 20% | 1,094 | 2,067 | 89% | 6,692 | 31% |
SG&A | -644 | -839 | -913 | 9% | 42% | -1,412 | -1,752 | 24% | -4,678 | 37% |
EBIT | 290 | 110 | 204 | 85% | -30% | -318 | 314 | -199% | 2,014 | 16% |
Interest expenses | -57 | -25 | -29 | 14% | -50% | -105 | -54 | -48% | -141 | 38% |
FX gain/loss | 55 | 19 | 124 | 542% | 124% | 21 | 144 | 583% | 2 | 7175% |
Other gain/loss | 15 | 11 | 14 | 30% | -7% | 38 | 25 | -35% | 59 | 42% |
PBT | 303 | 115 | 313 | 172% | 3% | -364 | 428 | N.M. | 1,934 | 22% |
NPAT-MI | 256 | 103 | 319 | 209% | 25% | -424 | 422 | N.M. | 1,547 | 27% |
GPM | 13.4% | 10.5% | 12.1% |
|
| 7.3% | 10.5% |
| 12.1% |
|
SG&A exp./Sales | 9.2% | 9.2% | 9.9% |
|
| 9.5% | 9.2% |
| 8.5% |
|
OPM | 4.2% | 1.2% | 2.2% |
|
| -2.1% | 1.2% |
| 3.6% |
|
NPM | 3.7% | 1.1% | 3.4% |
|
| -2.8% | 1.1% |
| 2.8% |
|
Source: HSG, Vietcap forecast (Last updated on February 22, 2023). HSG’s financial year end is September 30.
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