Dự báo tài chính forecating HPG JSC

we assume HPG will use its HRC products as an input for producing steel pipe and galvanized steel and,
therefore, we expect the company’s profitability to improve after the completion of phase 2. For FY18-20F,
we forecast gross profit margin to expand 3.4% pts from the average of 21.5% seen over FY13-17. As
such, we expect a CAGR growth of 32.9% in net profit over FY17-20F.

The key risks to the company are falling steel prices and rising raw material costs globally. Many analysts
believe the Chinese economy will slow again in 2018F and demand for steel products will eventually
decline, putting downward pressure on steel prices in the long term. Our sensitivity analysis in Figure 46
shows how HPG’s earnings could vary based on different average selling price scenarios. Every 2%
reduction in average selling price from our base case assumptions would lower our FY18F EPS estimate
by 4-5%.
Our sensitivity analysis in Figure 47 shows how HPG’s earnings could vary based on different iron ore
and coking coal prices. Every 5% increase in the price of coal and iron ore from our base case
assumptions would lower our FY18F EPS estimate by 2-3%.

For FY2017, HSC forecasts sales growth of 19.9% y/y but just 1.0% y/y growth in NPATMI given a tough
comparison.

For FY2017, HSC forecasts just 1.0% y/y growth in NPATMI in FY2017 given a tough comparison We forecast net sales of VND39,894 billion (+19.9% y/y) and NPATMI of VND6,667 billion
(+1.0% y/y) given our following assumptions:

1. We assumes growth of 9.3% y/y in construction steel sales volumes to 1.97 million
tons we expect growth of 25% y/y in steel pipe sales volume to 600,000 tons. We also
estimate billet sales volume comes to around 250,000 TPA or so. And then estimate
the ASP of construction steel will increase to VND10.67 million/ton (+10% y/y).
Therefore, we forecast steel sales of VND34,491 billion, (+20.3% y/y).

2. We expect animal feed sales to expand to VND1,630 billion, (+20% y/y) while for
other minor segments, we assume sales growth rates of 5-10%.

3. Gross profit will come at VND9,321 billion (+6.5% y/y) given a GPM of 23.4%

compared to 26.3% this year given the input price increase recently.

4. We expect the net financial loss to expand to (VND382 billion) given higher interest
expenses while SG&A expense will be VND1,240 billion (+38.6% y/y) as we project
SG&A as a % of net sales will be around at 3.11%.
Therefore, we forecast FY2017 forward EPS of VND7,514 and valued the company a FY2017
forward P/E of 5.9xs.


2019 business result forecast: We estimate HPG revenue might reach 65,738 billion (+14.79%
YoY). EAT might grow only slightly by 8% YoY to 9,899 billion. EPS Forward 2019 HPG is about
4,661 dong/share.
Revenue growth is led by the stable growth in the industry at 12% while real estate market
is slowing down and HPG market share in the North showed signs of saturation.
Meanwhile, Dung Quat phase 1 has just been operated which might lower profit margin
because of high depreciation and the fact that it is not at full capacity yet.
However, Dung Quat complex being operated will help HPG improving profit margin in longterm with its steel closed production cycle.
Along with it, there is expectation of expanding export market when Dung Quat complex is
operated. We hope that HPG might push on export market expansion since this is a potential
piece to solve growing problem as well as domestic supply redundant.
We think that steel market will slow down in 2019 and stay at 12% as forecasted by steel
associtation because construction demand will slow down, however, public investment
demand is still great so stseel section can still be stable next year.
Therefore, we hope that HPG will maintain the same growth speed with the industry, and
selling price will improve by 5% comparing to 2018. So, 2019 revenue might reach 65,738
billion (+15 % Yoy), EAT might increase less since cost and selling expense both increase
because of new factory and the promotion on Southern market.
We forecast 3Q16 revenue of VND7.5tn (+8.9% YoY) for Hoa Phat. Revenue should increase on
increased sales volume of construction steel (+23% YoY), thanks to completion of Phase 3 of the
integrated mill operation. However, we expect ASP to continue to decline (-15% YoY) in 3Q16, as the

third quarter is a low season for steel consumption, due to heavy rainfall in Vietnam. We forecast gross
margin and operating margin of 25.8% and 22%, respectively (3Q15: 23% and 19%, respectively).

V. Earnings outlook
For FY16, we forecast revenue at VND30.2tn (+10% YoY) and operating profit at VND7.2tn (+64% YoY),
with growth coming mostly from the steel division. We expect sales volume of construction steel and
steel billet of 1.64m tonnes (+19% YoY) and 280,000 tonnes, respectively, but we believe that ASP will
fall to VND9.5m/tonne (-12.8% YoY), due to stiff competition from Chinese steelmakers. However,
thanks to the low cost of raw materials, Hoa Phat’s operating margin should increase to 23.9%,
compared with 16% in FY15, leading to a 64% increase in operating profit in FY16.
We forecast 3Q16 revenue of VND7.5tn (+8.9% YoY) for Hoa Phat, with the rise in revenue the result of
an increase in the sales volume of construction steel (+23% YoY), due to the completion of Phase 3 of
Hoa Phat’s integrated mill operation. However, we expect a continued decline in ASP (-15% YoY), as
the third quarter usually sees low sales volume, due to Vietnam’s rainy season. Gross margin and
operating margin will come at 25.8% and 22%, respectively (versus 23% and 19%, respectively, in
3Q15). Thanks to favorable trends in global commodities prices and a high export tax on iron ore in
Vietnam (40%), the company should be able to maintain low steel production costs.