HOA PHAT GROUP - HPG
Section: Steel
The growth speed is solid
OVERWEIGHT
Target price
Current price
60,000 VND
54,500 VND
Le Minh Triet
(+84-8) 5413-5472
trietle@phs.vn
27.10.2014
Co. Profile
Ticker
HPG
Charter Capital (VND bln)
4,191
Outstanding shares (mln)
481.9
Market Capital (VND bln)
26,264
26,500 – 57,500
52W range (VND)
844,166
Ave. trading volume 3M
Beta
1.35
Foreign Ownership
45%
November 15th 2007
First listing date
HOSE - Vietnam
Major shareholders
Tran Dinh Long
24.12%
Vu Thi Hien
7.39%
Deutsche Bank AG &
Deutsche Asset Management
(Asia) Ltd
6.04%
Impressive 1H14 business result: 1H14 revenue increased strongly by
58.6% YoY to 13,197 billion dong thanks to a record of 2,255 billion dong
revenue from selling apartments of Mandarin Garden Real estate project
(accounting 16.9% total revenue). An impressive point of the first 6
months’ business result is building steel with a good growth of 30.8% YoY
to 10,919 billion dong of revenue while domestic steel sees many
difficulties like higher supply than demand, competition with cheap foreign
steel. This positive result came from Steel Complex II in Hai Duong which
was operated since October 2013 that improved HPG’s productivity and
lowered the price enough to compete with other competitors thanks to
close steel production technology.
Good revenue growth also pushed gross profit up by nearly 85% YoY to
2,822 billion dong with a gross margin of 21.4%, up by 2.6 percent points
comparing to 1H13. The finance investment profit was low and loans
interest in banks increased by 35.5% to 306.6 billion dong so HPG saw a
loss of 236.6 billion dong from finance activity. Compensating with that,
selling and management expense over total revenue ratio was low - only
3.3% and didn’t see much influence on the company profit result. EAT in
1H14 is impressive of 1,814 billion dong, up by 87.3% YoY, reaching
82.5% year profit target.
Positive prospect in 2014: We expect that HPG’s year net revenue in
2014 will increase to 24,615 billion dong (30% YoY) thanks to the stable
operation of Steel Complex II which will improve HPG’s productivity and
compensate with the low productivity since Steel Complex I has
temporarily stopped producing to improve productivity. Besides, lower
production cost is an advantage in competing with other competitors and
push the consumption up in 2014. Moreover, most profit from Mandarin
Garden Real estate project will be recorded this year with an expected
value of 400 billion dong. Therefore, expected EAT increased to 2,735
billion dong (40%), 24% higher than profit target.
Besides, HPG will continue investing in Steel Complex III from Q4 this
year with a designed capacity of 750,000 tons of steel a year. Expectedly
after finishing in Q1/2016, HPG’s total steel productivity will increase to 2
million tons of steel a year.
Rating an Overweight with a target price of 60,000 dong: The target
price is abstracted with 2 methods: P/E (60% weight, expected P/E of
10.0x multiplied 2014 forecasted EPS) and P/B (40% weight, expected
P/B of 2.6x with figure of 2014 book value). Considering the company’s
short-term prospect and current price, we rate an OVERWEIGHT on
HPG.
Price movement
www.phs.vn
3M
6M
Absolute
-2.0
+9.9
22.8
Percentage (%)
-3.8
+24.1
+80.9
KH
Công ty
2014E
23,000
24,615
2012
2013
Net Revenue
16,827
18,934
% gross margin
14.8%
17.3%
19%
10%
14%
16%
1,218
2,394
994
1,954
(bil dong)
12M
% OP margin
EBT
Net profit
3,336
2,200
2,735
% growth YoY
-20%
97%
40%
EPS (TTM)
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
BVPS
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 Vietnam biggest industrial manufacturers. The group’s core
industry – Steel and related products like coal, iron ore… - accounts over 80% revenue yearly. Hoa
Phat Furniture is also one of the famous brands with biggest market share in office furniture.
Company history
 Starting out as a trading company specialized in building machines from August 1992, Hoa Phat
has slowly expanded its business to Furniture (1995), Steel pipe (1996), Steel (2000),
Refrigerator (2001), and Real estate (2001).
 In 2007, Hoa Phat restructured and became Hoa Phat Group JSC – a joint stock company with
subsidiary companies.
 On November 15 2007, Hoa Phat was officially listed on Ho Chi Minh Stock Exchange under a
th
code 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
12.94
21.50
10.94
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
2.16
2.64
2.25
2.6
Cash at the end
1,064
1,294
2,125
1,677
PS
0.90
1.27
1.13
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.