Hoa Phat Group (HOSE: HPG) | 2Q26 Update, BUY - Upside +37.7%

Capacity Expansion Drives Earnings Growth

HPG 2Q26 Performance

HPG reported another strong quarter, with 2Q26 revenue and NPAT-MI reaching VND55,557bn (+53.1% YoY) and VND6,731bn (+68.7% YoY), respectively. Gross margin expanded to 18.9% (+70bps YoY, +320bps QoQ), supported by the continued ramp-up of Dung Quat 2, stronger steel spreads, and an improving product mix. For 1H26, revenue and NPAT-MI reached VND108,870bn (+46.7% YoY) and VND15,365bn (+97.6% YoY), completing 50.1% and 66.1% of our FY26 forecasts, respectively. Excluding the one-off Hung Yen urban area divestment gain of VND4,196bn recognized in 1Q26, core NPAT-MI reached VND12,008bn (+54.4% YoY), reflecting solid underlying earnings growth.

The steel segment remained the key earnings driver, delivering 1H26 revenue of VND105,013bn (+51.2% YoY) and NPAT of VND10,539bn (+63.5% YoY), supported by improving operating leverage as Dung Quat 2 utilization increased. Meanwhile, the agriculture segment reported weaker 1H26 results, with revenue and NPAT declining to VND3,287bn (-22.3% YoY) and VND641bn (-31.5% YoY), respectively, due to herd rebuilding and lower livestock sales. The real estate segment recorded revenue of VND479bn (+40.3% YoY) and NPAT of VND4,293bn (+1,027.7% YoY), primarily driven by the one-off Hung Yen divestment gain.

Operationally, crude steel production reached nearly 7.0mn tons (+36.0% YoY) in 1H26, while steel sales increased to 6.5mn tons (+28.0% YoY). HRC remained the key growth driver, with sales rising 57.0% YoY to 3.4mn tons, supported by the continued ramp-up of Dung Quat 2 and stronger domestic demand following anti-dumping measures on Chinese HRC.

Earnings Forecast

We raise our FY26E revenue and NPAT-MI forecasts to VND219,295bn (+40.5% YoY) and VND26,453bn (+71.2% YoY), respectively, reflecting stronger-than-expected HRC sales and lower iron ore costs.

For FY27E/FY28E, we forecast revenue of VND236,017bn (+7.6% YoY) and VND243,525bn (+3.2% YoY), while NPAT is projected at VND25,692bn (-2.9% YoY, +11.2% YoY if exclude one-off gain in 1Q26) and VND27,216bn (+5.9% YoY), respectively.

Target Price and Rating

We maintain our BUY rating on HPG while lowering our 12-month target price to VND 30,300/share (from VND 35,900/share), mainly due to a higher risk-free rate of 8.0% (from 5.0%), which lowers our DCF valuation to VND 27,200/share (from VND 32,000/ share). Our valuation also reflected a 5% cash dividend (par value) and a 10% stock dividend. Based on HPG's closing price of VND 22,000/share on 05 August 2026, our target price implies 37.7% upside.