Hoa Phat Group: From volume to value?

Hoa Phat Group, Vietnam's top steelmaker, is entering a new expansion phase focused on upgrading its product mix rather than pursuing pure volume growth.

With the Dung Quat 2 integrated steel complex project, located in Quang Ngai province, coming on stream, the group’s steelmaking capacity has risen to about 16 million tons per year, of which around 60% is high-grade and specialty steel.

The key challenge, however, remains securing demand for these higher value-added products amid intensifying competition.

Asset base expands sharply

Hoa Phat Group JSC (HoSE: HPG) reported strong growth in its Q4/2025 financial results. In the final quarter of the year, the company posted revenue of VND47.3 trillion ($1.82 billion) and net profit of VND3.89 trillion (VND149.42 million), up 34% and 38% year-on-year, respectively.

For the full year 2025, Hoa Phat recorded revenue of VND158.33 trillion ($6.09 billion), equivalent to 93% of the year's target. Net profit reached nearly VND15.52 trillion ($596.27 million), exceeding its plan by 3%. Steel remained the group’s core business, accounting for 94% of total revenue.

The most notable development in 2025 was the sharp expansion of the company’s asset base. The official commissioning of the Dung Quat 2 integrated steel complex in September 2025 pushed the gross value of fixed assets up by nearly VND60.11 trillion ($2.31 billion).

Over the year, Hoa Phat put more than VND73.8 trillion ($2.81 billion) of tangible assets into operation, lifting total fixed assets by 82% compared with the start of the year.

This surge suggests substantial room for revenue growth over the 2026-2030 period. The company’s rising “goods in transit” balance, which reached nearly VND10.8 trillion ($415.03 million), largely consisting of iron ore and coking coal, along with a VND3 trillion ($115.3 million) increase in raw material inventories, points to preparations for higher output in the year ahead.

Pressure in a ‘new territory’

According to the Vietnam Steel Association (VSA), crude steel production in 2025 reached 24.7 million tons, while consumption stood at 24.1 million tons. The VSA forecasts demand will rise to 28 million tons by 2028, indicating limited upside for industry-wide volume growth.

Against this backdrop, Dung Quat 2 has added around 5.6 million tons per year to Hoa Phat’s crude steel capacity, raising medium- to long-term concerns over market absorption.

Despite holding the largest domestic market share and exporting to more than 40 countries and territories, Hoa Phat is expected to face mounting competitive pressure. Vinmetal, a steelmaker within the Vingroup ecosystem, is projected to enter Vietnam’s steel market within the next two years with capacity of about 5 million tons per year.

In the high-grade steel segment, Hoa Phat chairman Tran Dinh Long said at the company’s 2025 AGM that the group had approached potential customers such as Thaco, Thanh Cong and VinFast to supply steel for automobile manufacturing.

Since then, however, market conditions have shifted. The establishment of Vinmetal suggests it is likely to serve as the steel supplier for Vingroup’s entire ecosystem, including VinFast.

Thanh Cong, meanwhile, remains heavily dependent on Hyundai, which is both its automotive manufacturing partner and a leading South Korean steel brand. In this context, Thaco is seen as the most promising potential customer for Hoa Phat’s high-grade steel, though no concrete cooperation has been announced so far.

Hoa Phat’s Q4 financial statements also show about VND6.3 trillion ($242.12 million) in construction-in-progress costs at Dung Quat 2, likely linked to a planned rail steel and specialty steel plant scheduled to begin operations in 2027.

However, the project still lacks clear off-take commitments. Despite receiving policy support from the Government, Hoa Phat’s CEO Nguyen Viet Thang said in October 2025 that the company had yet to secure any firm orders. In addition, the main contractor for the North-South high-speed railway project has not been selected, particularly after Vingroup announced its withdrawal from the mega-project.

Despite these challenges, as Southeast Asia’s largest steel producer, Hoa Phat’s move into high-grade and specialty steel is widely seen as inevitable. As margins in commodity steel continue to be squeezed by competition, higher value-added products could not only improve profitability but also support the development of key industries such as machinery manufacturing, automobiles, shipbuilding, oil & gas, and energy.

On the Ho Chi Minh Stock Exchange (HoSE), HPG shares closed Mondat at VD26,550 ($1.02) apiece.

Public investment underpins building materials demand

According to the Ministry of Finance, the state budget allocated around VND1,150 trillion ($44.2 billion) for development investment in 2025, the highest level on record, and is expected to remain elevated in 2026.

Meanwhile, the Ministry of Construction reported that as of December 19, a total of 237 projects nationwide had met conditions for groundbreaking or inauguration, involving more than VND627 trillion ($24.1 billion) of state capital and about VND2,790 trillion (VND107.23 billion) from other sources.

This backdrop indicates that public investment continues to act as a key pillar of the economy, creating significant growth opportunities for related sectors, particularly suppliers of construction materials.