- We maintain our rating for HSG at UNDERPERFORM despite increasing our target price by 37% as the company’s share price has rallied by 42% over the last 14 months.

- Our higher target price is due to (1) rolling our target price horizon forward to mid-FY2025, (2) changing our valuation methodology to 5-year DCF from our previous mix of 70% 5-year DCF and 30% target P/E, all of which offset (1) 43% lower FY2024F NPAT-MI, (2) 24% lower FY2025-28F aggregate NPAT-MI, and (3) a mild 10bps higher WACC.

- We expect FY2024F NPAT-MI to surge by 30x YoY from FY2023’s low base, driven by top-line growth of 21% and spread-driven GPM expansion of 255bps that offsets 20bps higher SG&A/sales. However, we lower FY2024F NPAT-MI by 43% due to lower-than-expected FY2023/H1 FY2024 results which only fulfilled 2%/27% of FY2023F/old FY2024F forecasts.

Kindly access the details in our Sector Update, which is available for download at the link below.

Galvanized Steel Sector - Sales and margins to recover from low base, valuations outpace fundamental progress

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