Hoa Phat Group (HOSE: HPG) | Initiation Report, BUY – 1Y Upside +53.1%

Company Information

Established in 1992, Hoa Phat Group (HPG) began as a machinery trading company before diversifying into key businesses including steel, furniture, refrigeration, real estate, and agriculture. Steel manufacturing maintained to be the major business of HPG. The company was listed on the Ho Chi Minh Stock Exchange (HOSE) on November 15, 2007, ticker HPG. HPG is currently the largest steel producer in Southeast Asia with a total capacity of 8.9 million tons of construction steel and hot rolled coil (HRC).

Financial Performance

During 2020–2024, HPG’s revenue experienced significant fluctuations. In 2021, revenue peaked at VND 149,680 bn, up 66.1% YoY as the company enjoyed high demand post Covid-19 and favorable profit margin. In 2023, however, its revenue declined to VND 118,953 bn due to the feeble domestic real estate market. HPG's revenue recovered to VND 138,855 bn in 2024 (+16.7% YoY) but not yet reached the pre-pandemic high.

Investment Rationales

We are convinced by both Steel sector outlook and HPG’s prospects:

Bright sector outlook:

o       The government has identified public investment as a key pillar to drive GDP growth above 8% for 2026–2030 period, with major infrastructure projects.

o       The real estate market recovery will also serve as a key growth driver for steel demand during 2025–2027.

o       Vietnam imposes anti dumping tariffs to enhance the competitiveness of domestic enterprises.

HPG is in a perfect position to enjoy the growing prospects of the steel sector:

o       HPG holds a dominant position in Vietnam and Southeast Asia.

o       The completion of DQ2 plant will raise HPG’s total crude steel capacity to 14.5 mn tons/year.

o       HPG’s state-of-the-art Basic Oxygen Furnace (BOF) production lines deliver long-term cost advantages through lower production costs and greater control over HRC supply.

Valuation and Recommendation

Based on valuation using the DCF, P/E and EV/EBITDA methods, SBBS initiate a BUY recommendation on HPG, with a 12M target price of VND 37,200/share. This offers a potential upside of 53.1% from the closing price of VND 24,300/share as of April 11, 2025.