Title HPG_BUY_TP 76,500 VND_Upside +16.9_Steel Dragon get off the ground_BSC Company Update_25052021
Report Type Phân tích công ty
Source BSC
Industry Basic Materials
Bussiness HPG
Detail Date : 25/05/2021
Total pages : 9
Language : English
File Type : .PDF
FileSize : 942 Kb
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Short Content

 VALUATION

BSC maintains BUY recommendation with HPG and raises its 2021 target price to VND76,500/share (+5% compared to the target price in the Q2.2021 Industry Report) due to (1) raising the company's forecast for 2021's business results more 23% (2) reduce target P/E from 10.0 to 9.0x and EV/EBITDA from 7.0 to 6.0x to reflect reduced profit growth forecast in 2H2021 and the possibility of lower profit in 2022 when the ground level steel and raw material prices gradually return to average (BSC forecasts profit 2022 -18% YoY).
 
FORECAST OF BUSINESS RESULTS 
BSC forecasts HPG's 2021 revenue to reach VND 147,209 billion (+63.3% YoY), NPAT of VND 31,015 billion (+130.8% YoY), equivalent to EPS = VND 8,893/share (assuming the bonus and welfare fund is deducted 5%). 
 
INVESTMENT THESIS
  • Steel industry entered a new growth cycle with a new price level.
  • Accelerate construction of the expansion phase at Dung Quat Complex to take advantage of favorable conditions of the industry (expected to start construction from the beginning of 2022).
  • Strong financial potential.
RISKS
  • Risk of governments taking measures to curb the rise in steel prices.
  • Risk of material price fluctuations, especially ore and HRC.
COMPANY UPDATE
  • HPG recorded a record profit in Q1/2021. Net revenue of 31.177 billion (+62% YoY), NPAT 7,005 billion (+204% YoY), completing 26.2% and 38.9% of the plan, respectively. 
  • The 2021 AGM marks HPG's transformation with the optimal orientation of the ecosystem and investment in expansion of Dung Quat Complex. HPG closes the ex-rights date to receive the 2020 dividend (5% cash and 35% shares) as May 31, 2021, and paid on June 11, 2021
  • Factories operate at 100% capacity. Consumption volume in April was positive. Selling prices continued to increase to reflect rising raw material costs, especially in April and May 2021.
  • Measures to "cool down" steel prices being studied by the government are not a big risk in the short term for Hoa Phat, and are positive in the medium term.