WHY HOA PHAT GROUP?
Hoa Phat Group is a transparent success story for shareholders in Vietnam over the past decade. Regardless of that, it trades on a really low P/E ratio. While dividends haven’t been a lot to talk of traditionally, they could ramp up in future years. Buyers trying to acquire publicity to the thematic of Vietnam’s future infrastructure spend, could be tempted to take a detailed have a look at Hoa Phat Group.
AN OVERVIEW OF THE HOA PAT GROUP (HOSE:HPG) BUSINESS
Hoa Phat Group is the main industrial manufacturing group in Vietnam. Over 80% of revenues relate to metal manufacturing, the place they’ve a big market share of above 30%, with goals to get to 40%. Their agricultural enterprise phase can be experiencing excessive development charges. They’ve typically traded on a single digit PE ratio and are properly positioned for Vietnam’s robust give attention to infrastructure improvement.
Background of Hoa Phat Group
The primary institution of the Hoa Phat firm title occurred again in 1992. Within the Nineties they went from tools, then furnishings, then established Hoa Phat Metal Pipe Firm. Within the early 2000s they expanded into development, refrigeration and actual property.
2007 was a big 12 months when Hoa Phat Group Joint Inventory Firm restructured as the last word mum or dad firm and listed on the HCMC inventory alternate.
Very spectacular company story of Vietnam
Generally an image tells the story of success so I shall go away the beneath 10 12 months income / revenue development chart right here.
Supply: Hoa Phat Group 2020 Annual Report
Hoa Phat Group income / revenue combine.
Beneath is the phase break down if the place income / earnings are coming from.
Supply: Hoa Phat Group 2020 Annual Report
Hoa Phat Group metal market share development.
Resulting from Hoa Phat Group’s excellent success within the final decade, they’re now the clear main participant by way of Vietnam’s manufacturing development metal.
FACTORS TO DECIDE ON WILL HOA PHAT GROUP SHARES KEEP RISING IN 2022?
Execution of funding in Dung Quat Advanced 2 – This can be a very massive venture for Hoa Phat Group that had already been in planning for a very long time. It has a design capability of 5.6mn tons, together with 4.6mn of sizzling rolled coil (HRC). Demand for HRC pertains to materials for manufacturing of many merchandise similar to metal pipes, galvanised metal sheets, car spare components and family home equipment.
This venture may grow to be operational in 2024 and in consequence may assist annual revenues soar by 60-70%.
Demand story stays robust from Vietnam infrastructure spend / housing rebound – Vietnam has some main plans by way of infrastructure over the subsequent few years at the least which can be seen drivers to profit Hoa Phat Group. The federal government has made robust commitments inside their funds plans on the likes of Airports, highways, rail techniques and seaports.
The actual property outlook additionally seems comparatively strong as extra certainty comes again into hopefully a put up covid world.
Market share – The chart I confirmed earlier confirmed how Hoa Phat has grown rapidly to be the dominant native participant in metal. Having mentioned that, there may be nonetheless room to win much more market share.
Dividends – That is considerably tied into the primary catalyst of the execution of funding in Dung Quat Advanced 2. The corporate has flagged increased money dividends when this ramps up. Generally I observe that markets get up to re-rating low cost valuations when the working cashflow and resultant dividends is clearly on show for everybody to see.
VIETNAM STOCK MARKET VALUATIONS – HOA PHAT GROUP PE RATIO, YIELD ETC.
Hoa Phat Group PE Ratio – 4.1 occasions
Hoa Phat Group dividend yield – 1.2%
* Supply: TIKR information captured on June 14th 2022
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HOA PHAT GROUP SIZE IN TERMS OF VIETNAM STOCK INDEX AND COMPONENTS
Hoa Phat Group on the time of writing is concerning the ninth largest firm of my searches of Vietnam inventory checklist of the biggest corporations. The market cap in USD is circa $6 billion.
IS HOA PHAT GROUP A GOOD UNDERVALUED VIETNAMESE STOCK TO BUY FOR 2022?
The inventory had a speedy rise in 2021 notably over the primary a part of the 12 months. A lot in order that traders may very well be forgiven for considering they’ve missed the boat on this. Nevertheless since round November of final 12 months the inventory has had a big decline. The falls have notably gathered tempo in 2022 amidst very weak world and Vietnam inventory markets.
Regardless of the good share value efficiency of 2021, the inventory nonetheless trades cheaply. As I highlighted above within the TIKR analysis information, the inventory is on a trailing P/E of simply 4 occasions!
Digging a bit additional with the TIKR information, analysts numbers counsel margins and earnings may come below strain in contrast with 2021. On analysts forecast numbers for 2022 we’re a speaking a couple of P/E nevertheless of nonetheless circa 5 occasions. After this 12 months’s numbers analysts have robust EPS development forecasted for 2023 & 2024.
You possibly can argue it should at all times commerce a bit low cost. It could be labelled as a cyclical sort firm by many market contributors. Maybe it will be extra weak to a world demand shock than most. With inflation the large story throughout the globe in 2022 to this point, I can perceive Hoa Phat Group shares underperforming the market. The corporate continues to be in enlargement mode so maybe rising prices pressures are a fear within the shorter time period.
Over the past 12 months or so in world inventory markets traders appear to be waking as much as the actual fact (for a change in comparison with the few years prior!), that issues like excessive certainty of shorter time period earnings and cashflows do matter. Extra importantly, so does the valuation you pay for a inventory.
Regardless of all of the macro dangers round and a few viewing this as a cyclical inventory, I’d assume the present low valuation stands you in good stead of doing properly over the subsequent few years with Hoa Phat Group Inventory.
Their dominant market share, scale, and place to cater for the Vietnam authorities’s robust urge for food for infrastructure improvement put it an excellent place. Extra capability is rapidly coming on-line, aiding the corporate’s money flows to ramp up over the subsequent couple of years. This paves the best way for Hoa Phat to grow to be a strong excessive dividend paying inventory by 2023/2024.
I spend my time in Vietnam’s south and Ho Chi Minh Metropolis and may definitely relate for the necessity of huge infrastructure tasks similar to one other worldwide airport, extra highways and environment friendly rail networks and so on. This form of want gained’t go away anytime quickly.
As an apart, I notice that VinaCapital would have been a daily vendor of this inventory which may should some lengthen contributed to holding again the value development at some levels when the inventory was going up final 12 months. Such promoting although is just not as a result of they don’t just like the inventory. It grew to greater than 20% weight from performing so properly of their VOF fund. It’s subsequently pure to anticipate they’d do a little bit of trimming for danger administration functions, and to rebalance to weights shoppers can be extra snug with.
OTHER VIETNAM STOCK INDEX COMPONENTS REVIEWS
In case you are considering related summaries and evaluation on different bigger Vietnam listed shares listed here are another hyperlinks to take a look at.
And must you need a very fast description of the biggest 10 corporations listed on the Vietnam inventory alternate, make sure to go to the beneath weblog put up I made final 12 months.
VIETNAM LARGEST 10 COMPANIES ON STOCK MARKET
I summarize the biggest Vietnam corporations by market cap:
VIETNAM LARGEST 10 COMPANIES ON STOCK MARKET
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