- We maintain a MARKET PERFORM rating for HSG and cut our target price (TP) by 31% to VND13,500/share.
- Our lower TP reflects 57%/60%/53%/39%/31% cuts to our respective FY2025–29F NPAT-MI forecasts, driven by (1) FY2024 NPAT-MI missing our forecast by 35% and (2) a more cautious outlook for the galvanized steel market. These are partly offset by a lower WACC of 14.3% (vs 15.5%) due to a higher debt-to-capital ratio of 33% (vs 21%), following FY2024 results.
- We cut our FY2025–29F earnings forecasts due to: (1) a 5% annual drop in sales volume from weaker exports, partly offset by stronger domestic growth; (2) ~80 bps GPM cuts each year on average from higher HRC input costs after the imposition of the anti-dumping (AD) duties on Chinese HRC (AD20); and (3) 55 bps higher SG&A/revenue per year from unexpected FY2024 shipping costs and HSG’s expansion of retail chain Hoa Sen Home.
- For FY2025F, we expect a 2% YoY NPAT-MI decline. We expect (1) flat volume growth, (2) 10% pts GPM YoY on 3.5% ASP growth (vs 3.4% YoY input cost increase), and (3) 30 bps YoY lower SG&A/revenue due to lower freight costs and cost-optimization efforts. However, we project these to be offset by a YoY lower net FX gain due to less USD inflows from less exports.
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