HOA PHAT GROUP - HPG
Sector: Steel
A favourable start
OVERWEIGHT
Target price
Current price
60,000 VND
51,000 VND
Le Minh Triet
(+84-8) 5413-5472
trietle@phs.vn
02.06.2014
Co. Profile
Ticker
HPG
Charter Capital (VND bil)
4,191
Outstanding shares (mil)
481.9
Market Capital (VND bil)
24,577
26,500 – 57,500
52W range (VND)
844,166
Ave. trading volume 3M
Beta
1.35
Foreign Ownership
45%
15/11/2007
First listing date
HOSE - Vietnam
Major shareholders
Trần Đình Long
24.12%
Vũ Thị Hiền
7.39%
Deutsche Bank AG &
Deutsche Asset Management
(Asia) Ltd
6.04%
www.phs.vn
Price movement
3M
6M
Absolute
-2.0
+9.9
12M
22.8
Percentage (%)
-3.8
+24.1
+80.9
Outstanding Q1 business result: Q1/2014 revenue increased
strongly by 64.6% YoY to 6,576 billion dong thanks to an extra of
1,583 billion dong revenue from the real estate project Mandarin
Garden (accounting 24.1% total revenue). Besides, the core activity of
HPG – building steel – also saw a good growth of 14.2% YoY to 4,336
billion dong revenue. The spotlight of Q1 this year was building steel
consumption of 200,000 tons, up by 27% YoY, claiming the second
biggest market share in the country. This positive achievement came
from the Second Steel Complex in Hai Duong which came to
operation from October 2013 which raised the production ability of
HPG and lowered the selling price to a low enough level to compete
with others thanks to a closed circle production.
The good revenue growth also pushed the gross profit up to twice
YoY of 1,390 billion dong, seeing a gross margin of 21.3%, up by 3
percent point comparing to Q1/2013. With no profit from finance
investment and banks’ loans interest increasing by 48.4% to 120.8
billion dong, HPG saw a loss of 101.1 billion dong from finance
activity. On the other hand, selling and management expense over
total revenue accounted only a small weight of 3.4% so it didn’t see
much influence on the company’s profit. Q1/2014 EAT of HPG saw an
impressive result of 870.4 billion dong, up by 90% YoY, reaching 40%
profit target.
Positive prospect in 2014: We forecast that HPG’s net revenue in
2014 will increase to 24,615 billion dong (+30% YoY) thanks to the
Second Steel Complex which will raise HPG’s productivity and
compensate the short amount because the First Steel Complex has
temporarily stopped operating to expand the productivity. Besides, the
dropping production expense is an advantage so that HPG’s steel
price is more competitive than other peers which will push the
consumption in 2014. Besides, most profit of Mandarin Garden project
will be recorded this year with an expected value of 400 billion dong.
Therefore, EAT is expected to increase to 2,735 billion dong (+40%),
24% higher than profit target.
Overweight recommendation with a target price of VND 60,000:
We have evaluated the target price of DHG at 60,000 dong by
applying P/E (60% weight, expected P/E of 10x multiplied 2014
forecasted EPS) and P/B (40% weight, expected P/B of 2.6x with
figure of 2014 book value) evaluation method. Considering the
company’s short-term prospect and the current price, we rated an
“OVERWEIGHT” on HPG.
2012
2013
Co’s
plan
2014E
Net Revenue
16,827
18,934
23,000
24,615
% gross margin
14.8%
17.3%
19%
10%
14%
16%
1,218
2,394
3,336
(bil. VND)
% OP margin
EBT
Net profit
% growth YoY
EPS (TTM)
BVPS
994
1,954
-20%
97%
2,200
2,735
40%
2,372
4,663
5,676
19,294
22,671
25,064
P/E
22.1
11.3
10.0
P/B
2.7
2.3
2.6
Source: PHS, HPG
This report is for reference only and investors should be responsible for their own investment decisions
Phu Hung Securities Corporation
Company description
Hoa Phat Group (HPG) is one of the biggest industrial manufacturers of Vietnam. The core industry
of the group – Steel and related products like coal, iron ore… - accounts over 80% annual revenue.
Hoa Phat Furniture is also one of the well-known names with the biggest market share of office
furniture.
Company history
 Starting out as a trading company specialized in building machines from August 1992, Hoa Phat
slowly expanded the business to furniture (1995), Steel pipe (1996), Steel (2000), Refrigerating
(2001), and Real estate (2001).
 In 2007, Hoa Phat restructured from Group to Hoa Phat Group JSC including Hoa Phat JSC
and subsidiary companies.
 November 15 2007, Hoa Phat was officially listed on Ho Chi Minh Stock Exchange under the
th
ticker of HPG.
Capital increase process (VND bln)
Source: HPG
This report is for reference only and investors should be responsible for their own investment decisions.
Phu Hung Securities Corporation
Financial ratio (VND bln)
Income statement
2011
2012
2013
Net sales
17,852
16,827
18,934
24,615
Growth rate
Cost of goods sold
14,979
14,342
15,651
19,938
Revenue growth rate
25%
-5%
12%
28%
2,873
2,485
3,284
4,677
Gross profit growth rate
17%
-13%
32%
42%
SG&A expense
619
861
670
837
Net profit growth rate
-8%
-20%
97%
40%
Financial income
329
165
276
234
Total asset growth rate
18%
9%
21%
9%
1,070
585
528
739
Equity growth rate
16%
9%
18%
27%
766
527
371
214
Profitability ratios
Operating profit
2,254
1,624
2,614
3,840
Gross profit margin
16%
15%
17%
19%
Profit before tax
1,489
1,218
2,394
3,336
EBT margin
8%
7%
13%
14%
Profit after tax
1,236
994
1,954
2,735
Net profit margin
7%
6%
10%
11%
Balance Sheet
2012
2012
2013
ROA
7%
5%
8%
11%
17,525
19,016
23,076
25,117
ROE
17%
12%
21%
23%
Current assets
9,486
10,221
12,403
12,966
DuPont Analysis
Cash and equivalent cash
1,064
1,294
2,125
1,677
Net profit margin(1)
7%
6%
10%
11%
Receivables
1,897
1,646
1,629
1,466
Asset turnover (2)
102%
88%
82%
98%
Inventories
6,347
6,822
8,030
9,147
Equity multiplier (3)
236%
235%
243%
208%
Long-term assets
8,039
8,795
10,674
12,151
ROE = (1)x(2)x(3)
17%
12%
21%
23%
273
26
21
24
5,920
7,007
9,187
10,554
Receivable outstanding days
37.62
37.77
31.14
22.95
19,016
23,076
25,117
Inventory outstanding days
132.65
167.58
173.18
167.45
20.00
30.33
41.51
38.77
Gross profit
Financial expense
Interest expense
Total assets
Long-term receivables
Fixed assets
Resources
17,525
2014E
Financial ratio
2014E
2011
2012
2013
2014E
Management ratios
Liabilities
9,561
10,438
13,489
12,952
Payable outstanding days
Short-term loans
6,647
7,362
11,143
10,497
Asset turnover
1.02
0.88
0.82
0.98
942
1,521
2,314
2,236
Long-term asset turnover
2.22
1.91
1.77
2.03
Long-term loans
2,914
3,076
2,347
2,455
Fix asset turnover
3.02
2.40
2.06
2.33
Equities
7,414
8,085
9,500
12,078
Chartered capital
3,178
4,191
4,191
4,191
Current ratio
1.43
1.39
1.11
1.24
Capital surplus
2,258
2,207
2,207
2,207
Quick ratio
0.47
0.46
0.39
0.36
-
-
-
-
Cash ratio
0.16
0.18
0.19
0.16
Retained profit
1,540
1,393
2,643
5,221
Cash flow
2012
2012
2013
Total debt/Total Equity
1.29
1.29
1.42
1.07
Total debt/Total Asset
0.55
0.55
0.58
0.52
Total asset/Total Equity
2.36
2.35
2.43
2.08
13.32
22.13
11.26
10
Payables
Development fund
2014E
Liquidity ratios
Capital Structure
Net operating cash flow
304
2,269
3,234
2,717
Net investing cash flow
(937)
(1,660)
(3,252)
(2,253)
Net financing cash flow
649
(380)
850
(912)
Index per share
16
230
831
(448)
PE
Cash at the beginning
1,047
1,064
1,294
2,125
PBV
2.22
2.72
2.32
2.6
Cash at the end
1,064
1,294
2,125
1,677
PS
0.92
1.31
1.16
1.00
EPS
3,942
2,372
4,663
5,676
Cash earning/share
5,670
3,795
6,382
7,524
23,640
19,294
22,671
25,064
Net cash flows
Book value
Source: PHS
This report is for reference only and investors should be responsible for their own investment decisions.
Phu Hung Securities Corporation
Analyst Certification
Each research analyst(s), strategist(s) or research associate(s) responsible for the preparation and content of all or any identified portion of this research
report hereby certifies that, with respect to each issuer or security or any identified portion of the report with respect to each issuer or security that the
research analyst, strategist or research associate covers in this research report, all of the views expressed by that research analyst, strategist or research
associate in this research report accurately reflect their personal views about those issuer(s) or securities. Each research analyst(s), strategist(s) or
research associate(s) also certify that no part of their compensation was, is, or will be, directly or indirectly, related to the specific recommendation(s) or
view(s) expressed by that research analyst, strategist or research associate in this research report.
Ratings Definition
Overweight (OW) = Expected to outperform the local market by >10%
Neutral (N) = Expected to in line with the local market by +10%~ -10%
Underweight (UW) = Expected to underperform the local market by >10%.
Not Rated (NR) = The stock is not rated in Phu Hung’s coverage universe or not listed yet.
Performance is defined as 12-month total return (including dividends).
Disclaimer
This information has been compiled from sources we believe to be reliable, but we do not hold ourselves responsible for its completeness or accuracy. It
is not an offer to sell or solicitation of an offer to buy any securities. Phu Hung Securities and its affiliates and their officers and employees may or may not
have a position in or with respect to the securities mentioned herein. Phu Hung Securities (or one of its affiliates) may from time to time perform
investment banking or other services or solicit investment banking or other business for any company mentioned in this report. All opinions and estimates
included in this report constitute our judgment as of this date and are subject to change without notice.
Phu Hung Securities Corporation (PHS)
5 Floor, Lawrence S. Ting Building
801 Nguyen Van Linh., District 7
HoChiMinh City, Viet nam
Phone: (84-8) 5 413 5479 | Fax: (84-8) 5 413 5472
Website: www.phs.vn | E-mail: info@phs.vn
This report is for reference only and investors should be responsible for their own investment decisions.