Hoa Phat Group's net profit may reach $1 billion with new mill

Hoa Phat Group (HoSE: HPG), which claims to be the biggest steel producer in Vietnam and Southeast Asia, may record a net profit of VND20-25 trillion ($793-991 million) when its new mill in the central region becomes fully operational, Vietcombank Securities (VCBS) said in a recent report.

The group’s revenues are projected to reach VND175-200 trillion ($6.94-7.93 billion) when its Dung Quat 2 steel complex in the central province of Quang Ngai enters full operation.

The complex may churn out the first products in a test run earlier than initially expected, in Q4 this year, and its first phase may become operational in Q1/2025. The second phase may undergo a test run in Q3/2025 and start official operation in Q4.

With an annual capacity of 5.6 million tons, the Dung Quat 2 complex will provide a big boost for Hoa Phat in 2025, VCBS said.

The complex’s sales volume is projected to reach 1.5 million tons in 2025, 4 million tons in 2026, and gradually increase to 5 million tons in 2027 and 6 million tons in 2028.

The operation of the new mill may coincide with the Vietnamese government’s decision to levy an anti-dumping tax on Chinese hot-rolled coin (HRC) steel. “We reckon that HPG’s HRC sales depend greatly on the [Vietnamese] government’s HRC protectionism. A final decision on [anti-dumping tax] will be positive for the company.”

HPG said it booked a net profit of VND3,022 billion ($119.78 million) in Q3/2024 on revenue of VND34 trillion, up 51% and 19% year-on-year, respectively.

In Q4, the group’s earnings will likely improve as construction activity is forecast to accelerate after the Chinese central bank announced the biggest stimulus package since Covid-19 to revive the real estate market.

Meanwhile, the world iron ore price dropped to $91 a ton in Q3, and coal prices touched a three-year low at $186 a ton. Therefore, HPG’s profit margin is expected to improve in the time ahead.