HPG – Initial report – Everything is falling into place for 2026E

Winning back a bigger slice of market share from China. It seems that everything is falling into place for HPG: Dung Quat II came onstream just as the MoIT launched an investigation and imposed anti-dumping duties on Chinese HRC imports. Thus, public policy has eased pricing pressure for domestic producers while stimulating local demand, making sales volume the primary revenue growth driver for Hoa Phat in 2025-26E.

Favorable cost-price spread contributes to a sharp increase in NPAT. We expect the cost-price spread to widen substantially in 2025-26E, resulting in 2.7-3.5 percentage points improvement in gross margin. From 2027 onward, we project input costs and selling prices to stabilize, leading to a gradual normalization of margins.

Yuanta vs the Street. Our 2026 NPAT forecast is 10% higher than the Bloomberg consensus, which is likely due to our more optimistic input cost assumptions. Consequently, our fair value estimate is 14% above the mean target price of the 14 sell-side analysts who currently (Oct 13) cover HPG.

We initiate coverage on HPG with a BUY rating, with a DCF-derived target price of VND38,400, implying 12-month TSR of 32%. We project ROE to peak at 16% in 2026E, driven by the peak-level cost-price spread and improved asset utilization. Beyond 2026, we project ROE to gradually normalize as leverage declines and revenue stabilizes.

Key risks: Selling prices are always a key risk given uncertainties over Chinese steel production, which is a wildcard for forecasts. Over the long term, it could be challenging to fully absorb HPG’s 8.6 million tons of HRC capacity in the domestic market, if supply outpaces domestic demand while export opportunities remain constrained by global trade protectionism.

Please access the link for more details: HPG — Initiation — Oct 2025