Investment Recommendation

HSG_BUY_TP 47,800_Upside +27.8_Flourish season_BSC Company Update_14052021

Date

11/05/2021
Security code

HSG
Company

Hoa Sen Group
Language

Tiếng Anh
Number of Downloads

171

Detailed report

VALUATION

BSC raises HSG's target price to VND47,800/share due to (1) an 86% increase in FY2020/21 NPAT forecast after reflecting bullish momentum and HRC price outlook, however (2) lowering target P/E from 9 times to a 10-year average of 7 times to reflect our forecast of a decline in earnings in Q4 FY2020/21 and FY 2021/22 when HRC price corrects after a hot period.

FORECAST OF BUSINESS RESULTS

BSC raised HSG's 2020/21F net sales forecast to 43,668 billion (+58.6% YoY) and NPAT 3,129 billion (+171% YoY), up 29% and 86% respectively compared to the forecast in Latest report. FY2020/21 EPS is estimated at VND6,828/share, fw P/E = 5.5 times.

In FY 2021/22, we forecast HSG's revenue from traditional steel products business to reach VND 38,812 billion (-11.1% YoY), NPAT of VND 2,563 billion (-18.1% YoY), equivalent to EPS = VND 5,483/share.

INVESTMENT THESIS

Successful restructuring helps HSG firmly enter a new bull cycle.
Solving the problem of growth by taking advantage of the strength of the retail system.

CATALYST

HRC price increased sharply +25-40% YTD, inventories at the end of Q1/2021 increased accordingly to meet production demand for the peak season.

RISKS

Material price fluctuations, especially when HRC has increased rapidly in recent times.

Increased risks of countries's trade remedies.

COMPANY UPDATE

Performance results in the first half of the fiscal year 2020/21, completing 107% of the year's profit plan. Accumulated in the first half of the year 2020/21, HSG's net revenue reached 19,946 billion (+61% YoY), NPAT 1,607 billion (4.2 times higher than the same period).
HSG has deployed 02 Hoa Sen Home furniture and building materials supermarkets in Thot Not and Cai Rang, Can Tho.
HSG submits a plan to buy back 22 million shares (5% of outstanding shares) as treasury shares from now until Jan 2022.