- NKG reported Q2 2022 revenue of VND7.2tn (USD308.8mn; +3% YoY and +1% QoQ) and NPAT-MI of VND201bn (USD8.6mn; -76% YoY and -60% QoQ). We note that NKG’s NPAT-MI in Q2 2021 was a historic high, thus creating a high base for Q2 2022.

- NKG reported Q2 2022 gross margin of 12.4% compared to 13.4% in Q1 2022. However, NKG reverted approximately VND300bn (USD13.0mn) of inventory provision expenses in Q1 2022. If excluding this reverted provision from gross profit, NKG’s Q1 2022 gross margin would be 9.2%. We believe the QoQ improvement in gross margin (after adjusting for provision) was enabled by prices of hot rolled coil (HRC) and finished galvanized steel experiencing a short recovery in Q2 2022 following a strong correction in late 2021. These price movements created an opportunity for galvanized steel companies to buy up input HRC when prices were deemed low.

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