Steel giant Hoa Phat targets $336 mln in 2023 profit

Hoa Phat Group, the largest Vietnamese steelmaker, targets to reach revenue of VND150 trillion ($6.29 billion) in 2023, and after-tax profit of VND8 trillion ($336 million), up 6% but down 5% year-on-year, respectively.

The targets are part of the company’s 2023 business plan expected to be submitted to the upcoming annual general meeting of Shareholders for approval.

Hoa Phat, listed on the Ho Chi Minh Stock Exchange (HoSE) as HPG, plans to use undistributed after-tax profit as of December 31, 2022 for business activities. That means no dividend for 2022.

The plan reflects steel enterprises recording less positive business results in 2022 amid forecasts that they will continue to face difficulties in early 2023 due to poor export performance and fierce competition among manufacturers.

In 2022, Hoa Phat's quarterly revenue peaked in Q1 and gradually decreased quarter-to-quarter to the end of the year. Its after-tax profit in Q2 decreased by more than half compared to Q1 and became negative in the last two quarters. The group's gross profit margin also went down from 23% in Q1 to minus 3% in Q4.

Last year, the firm’s consolidated revenue reached VND142,771 billion ($5.99 billion), down 5% year-on-year, and its consolidated after-tax profit was VND8,444 billion ($354.34 million), a drop of 76% from 2021.

Hoa Phat supplied the market with 7.2 million tons of steel in 2022, down 7% compared to 2021, including steel billets, construction steel, and hot rolled coil (HRC). Of this, there were 4.2 million tons of construction steel, rising 10% year-on-year and making up 59% of total steel production. This also helped Hoa Phat maintain its lead in the domestic market with a 35% of market share.

In a recent report, KB Securities Vietnam (KBSV) forecast that sales of the "steel king" in Q1/2023 may decrease by more than 40% year-on-year to about 1.4 million tons. Hoa Phat's Q1 revenue is expected to drop 44% to VND24,588 trillion ($1.03 billion), with its profit margin falling to 3% compared to 23% in the same period last year. KBSV believed that Hoa Phat will suffer a net loss of VND130 billion ($5.45 million) in Q1 this year.

KBSV attributed the narrowing profit margin to the growth of steel prices failing to catch up with the increase of input material prices.

According to analysts, Hoa Phat's business performance may improve from Q2 of this year, assuming that mechanisms to support the real estate market are approved and the business activities of property developers become more vibrant. However, in a cautious scenario, KBSV believed that Hoa Phat's blast furnaces will only start operating at full capacity in the final quarter.

For the whole year, Hoa Phat is forecast to achieve revenue of VND126,770 billion ($5.32 billion), down 10% year-on-year, with nearly 7 million tons to be sold, a year-on-year decrease of 16%. Its net profit is estimated at only VND3.8 trillion ($159.46 million), nearly half that of 2022.

Meanwhile, top Vietnamese broker Saigon Securities (SSI) gave a more optimistic forecast, saying Hoa Phat will achieve VND121 trillion ($5.07 billion) in revenue this year, down 14%, but its net profit is expected to recover by 15% to VND9.7 trillion ($407.05 million) if steel prices remain stable and the impact of high-priced inventories eases.

SSI Research also noted that the reopening of China may help stabilize steel prices but would not have much impact on Hoa Phat’s export volume.

On the HoSE, HPG closed the Thursday session at VND20,800 (0.87) per share.