- We upgrade HT1 to OUTPERFORM from MARKET PERFORM as we raise our target price by 7% to VND16,600/share mainly due to a higher cash balance at end-June 2021 while maintaining our 2021-2025F earnings forecast unchanged. HT1’s share price retreated 4% over the last three months.
- Despite modest Q2 2021 EBIT growth of 5% YoY, lower interest expenses were the main support for 15% YoY NPAT-MI growth in Q2 2021, translating to a H1 2021 EBIT margin of 12.5% and NPAT-MI growth of 7% YoY — both of which are broadly in line with our full-year forecast.
- We maintain our 2021F NPAT-MI forecast of VND633bn (USD27.5mn; +4% YoY) as (1) we expect sales volume to modestly recover vs 2020 — especially in H2 2021 amid Vietnam’s fourth wave of COVID-19 that started in late April — while (2) ongoing competition and oversupply in the cement industry will continue to cause HT1 to maintain low selling prices and thus pressure gross margins. We continue to expect that falling interest expenses will be the key support for HT1’s 2021F NPAT-MI growth forecast as the company will pay down all of its remaining long-term debt during the year.
- Upside opportunity: Stronger-than-expected sales volume and production cost optimization.
- Downside risks: Higher-than-expected input costs (i.e., coal and electricity).

We expect HT1 to maintain competitive selling prices to support sales volume. HT1’s cement sales volume was 1.9 million tons (99% of its total sales volume) in Q2 2021, increasing 12% YoY and 31% QoQ (we note that Q1 is a low season for construction activities and thus construction demand). For H1 2021, HT1’s cement sales volume reached 3.4 million tons (+10% YoY). For H2 2021, we maintain our view that increasing Government infrastructure spending and strong export sales of cement and clinker to China will support HT1 to maintain its sales volume. On the other hand, HT1’s limited ability to consolidate market share amid ongoing competition and new capacity being added in the industry prompts our forecast for HT1’s sales volume growth at 1% YoY in 2021F (6.7 million tons; unchanged vs our previous forecast).

Ongoing competition and high coal prices in H2 2021 to weigh on margins. Gross margin in Q2 2021 recovered to 19.4% vs 13.8% in Q1 2021 but was low compared to 20.6% in Q2 2020, which resulted in H1 2021 gross margin of 17.0% vs 19.0% in H1 2020. Per management, HT1’s average cement selling prices decreased 4% YoY in H1 2021 to support sales volume. Meanwhile, HT1’s average input coal price in H1 2021 was 5% lower compared to H1 2020, which was due to HT1 being able to secure favorable prices in H1 2021. Nevertheless, management expects high coal prices will emerge in H2 2021. Therefore, we maintain our 2021F gross margin assumption of 16.7%.

Falling interest expenses to support earnings. HT1’s total debt balance at end-June 2021 was 21% lower vs end-2020 and 28% lower than end-June 2020. We maintain our forecast for a 34% YoY decline in 2021F interest expenses, which will support 4% YoY growth for our 2021F NPAT-MI forecast compared to a 5% YoY decline for our 2021F EBIT forecast.