HT1_BUY_TP 18.700_Upsize 20%_Business Recovery After Covid_BSC Company Update

 Valuation

▪ BSC recommends BUY for HT1, a target price of 18,700 VND/share, equivalent to an upside of 20% compared to the price on 30/06/2022 based on discounted cash flow method (FCFF), assuming HT1 will gradually increase output to pre-pandemic levels and operate stably at this capacity.

Forecast business performance

▪ BSC forecasts Net Revenue and NPAT in 2022 at 9,236 billion VND (+30.7% YoY) and 380 billion VND (+2.7% YoY), assuming: output +9% YoY, gross profit margin down to 10.9% due to coal price +100% YoY but selling price is only +20% YoY. ▪ In 2023, BSC forecasts Net Profit and NPAT of 9,160 billion VND (-1% YoY) and 419 billion VND (+10.2% YoY), assuming: output +4.4% YoY, gross profit margin increases to 11.5% due to price coal -20% YoY when supply stabilizes and selling price -5% YoY due to domestic oversupply.

Investment thesis

▪ HT1 has always had an outstanding performance in the cement industry dues to the advantage of low transportation costs.

▪ Consumption volume will gradually recover to pre-epidemic levels in 2022-2023 dues to benefits from public investment in infrastructure and oversupply in the Southern market.

▪ The gross profit margin in 2022 will decrease because the increase in selling price is not enough to offset the increase in coal price.

Catalyst

▪ Future growth potential from the project to convert 10.6 hectares of old factory in Thu Duc City into a complex office for lease.

Risks

▪ Fluctuations in raw material prices, especially coal prices;

▪ Demand for cement decreased, increasing competitive pressure .

Business update

▪ In Q1/2022, the Net Revenue of HT1 reached 1,957 billion VND (+12% YoY) but NPAT only reached 25 billion VND (-74% YoY). Gross profit margin decreased because the increase in selling price was not enough to offset the increase in coal price. ▪ Sales volume in Q1/2022 increased slightly, +3% Yo