HOA SEN GROUP (HSG)

September 19, 2O14

INITIATING COVERAGE: HOLD

Current price (9/19/2014):

VND

42,7OO

Target price:
Forecast price appreciation:

VND

46,5OO
8.9%

Short-term trading recommendation

HOLD

Mid-term resistance level

VND

Mid-term support level

VND

Bloomberg ticker: HSG VN

47,OOO
415OO

#_yPBS
VPBank
6OSecurities
-|

HS
G

5O
-

Exchange: HSX

Industry:

Steel

Beta

4O

1.19

52w High / Low (VND)

57,745 - 35,626

Outstanding shares (mn)

Market cap (VNDbn)

96.3
4,113

Free-float ratio (mn shares)

236,414

Foreign-owned ratio (%)

EPS
(VND)
3,952
3,358

FY2013

7.O%

5,941

FY2012

2.3%

3,761

FY2011

1.2%

1,622

Ratio HSG
P/E 12.7

Peer
9.6

VNI
15.4

P/B 1.8

O.7

2.O

1H14 Debt/Equity 2.3

1.8

1.1

1H14 Net margin 2.6%

1.2%

9.O%

FY2013 ROE 27.5%

13.O%

14.9%

FY2013 ROA 9.3%

2.3%

3.4%

2010-13
CAGR
Revenues 34%
EBITDA 17%
Net Income 39%

2O14E
(VND bn)
15,O3O
997
381

2O14-18F
CAGR
19%
23%
36%

Company Description:
- Established in 2001, Hoa Sen Group (HSG) specializes in
manufacturing galvanized steel sheet, steel pipes and other
construction materials to serve industrial production and civil
construction.
- The Group occupies 37% market share in the galvanized
steel sheet segment and 20% market share in the steel pipe
segment in 8M2014.
- The completion of Phase 2 of Hoa Sen Phu My Steel Sheet
Plant will increase its cold rolling capacity from 580K tons to
980K tons, galvanized capacity from 820K tons to 1.22 million
tons per year.
- 9M-FY2014 results: Net revenues: VND10,966 billion
(USD517 million), Net income: VND281.5 billion (USD13
million), Equity: VND2,348 billion (USD111 million).

www.VPBS.com.vn

2O

43.5%
Dividend
yield
5.4%
5.9%

FY2014 VPBS Forecast

LTM

28.5

LTM Avg trading vol

Year

3O

1O
O
I
-1O

We initiate coverage of Hoa Sen Group JSC (IJC) with a long-term

HOLD recommendation based on:
Strong revenue growth:
Largest market share: HSG occupies 37% market share of
galvanized steel sheet in 8M2014.
Exports to further drive growth: Export revenue accounts for 41% of
HSG's revenues in 9M-FY2014. Exports provide a good sale channel
during periods of stagnant domestic demand but may be subject to antidumping actions in various countries.
Strong profitability:
Gross margins will rebound from FY2015: In 2013, HSG wrongly
speculated on higher HRC prices, which will drag down FY2014
margins. Margins should improve in FY2015 once it has sold its highcost inventory.
Nationwide retail network improves customer service: HSG's 138
retail outlets allow it to deliver its products to end-users, adopt flexible
selling policies and improve margins.
CRC self-supply: Phase 2 of Hoa Sen Phu My Steel Sheet plant will
provide 100% of HSG's cold rolled coil (CRC), which would be subject to
a 7% tax if imported.
Good relative value:
HSG's FY2014 P/E ratio is estimated at 10.8x, below its regional peer
group, while its ROE, ROA and gross margin are significantly higher.
High leverage:
Pursuing aggressive expansion strategy pushed the Group's

Page I 1

Steel stock price index

debt/equity ratio above the median of local

steel companies.
Please see important disclosure information at the end of this
report.

www.VPBS.com.vn

Page I 2

CONTENTS
INDUSTRY OVERVIEW ......................................................................................................................................................................3
HOA SEN GROUP (HSG) ....................................................................................................................................................................5
HISTORY ...................................................................................................................................................................................5
ORGANIZATIONAL STRUCTURE AND MANAGEMENT .........................................................................................................6
SHAREHOLDERS AND OWNERSHIP .....................................................................................................................................8
COMPANY OVERVIEW .......................................................................................................................................................................9
A LEADING STEEL SHEET AND STEEL PIPE PRODUCER ...................................................................................................9
CAPACITY EXPANSION TO DRIVE GROWTH......................................................................................................................11
NATIONWIDE RETAIL NETWORK TO DELIVER PRODUCTS TO END USERS .................................................................13
SALES GROWTH TO BE FURTHER DRIVEN BY EXPORTS ...............................................................................................14
FINANCIAL PERFORMANCE ...........................................................................................................................................................15
COST ANALYSIS ....................................................................................................................................................................15
GROWTH.................................................................................................................................................................................16
EFFICIENCY AND PROFITABILITY .......................................................................................................................................18
LIQUIDITY AND SOLVENCY ..................................................................................................................................................20
FORECAST ASSUMPTIONS ............................................................................................................................................................21
VALUATION ...................................................................................................................................................................................... 24
DISCOUNTED CASH FLOW ...................................................................................................................................................24
COMPARABLE MULTIPLES ...................................................................................................................................................25
SENSITIVITY ANALYSIS...................................................................................................................................................................26
TECHNICAL ANALYSIS ....................................................................................................................................................................27
CONCLUSION................................................................................................................................................................................... 28

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Page I 3

INDUSTRY OVERVIEW
During the period from 2008 to 2013, the sales volumes of Vietnam Steel Association (VSA)'s
members achieved the compounded annual growth rates (CAGRs) of 18.9% in steel sheet and
15.3% in steel pipe, higher than a CAGR of 7.8% in construction steel.
The first 8 months of 2014 (8M2014) saw consumption volume of steel sheet increase by 29%
y-o-y thanks to exports while consumption of steel pipe grew by 32% y-o-y mainly due to
domestic growth.
Galvanized steel sheet (thousand tons)
Consumption

Production

2008
2009
2010
2011
2012
Source: Vietnam Steel Association

Steel pipe (thousand tons)

Consumption Production

2013 8M2014

2008
2009
2010
2011
2012
Source: Vietnam Steel Association

2013

8M2014

Steel sheet
Steel sheet is gradually replacing asbestos-cement for roofing and wall covering due to major
health concerns. Steel sheet is a type of flat steel product, produced from raw material which is
cold rolled coil. Steel sheet is diverse in terms of color, size, and thickness and has many
applications, but it is used mostly in roofing, construction, manufacturing mechanical products
such as automotive.
It's worth noting that the gap between supply and demand of this segment further widened as
new companies entered the market or when existing companies increased capacity. Steel sheet
produced by Vietnamese firms is of medium-grade, which is used mostly in roofing and general
usage such as home furniture and parts for motorcycle repair. Other flat products such as
heavy plates used for shipbuilding and galvanized sheets used for cars have to be imported.
The main growth driver of sales volume of this segment has been through export activities.
Countries like Myanmar, Indonesia and Malaysia have significant demand for steel sheets of
medium-quality for general usage and civil construction; these are products Vietnam can supply
at attractive prices. Vietnam's steel sheet producers, benefiting from relatively lower labor cost,
have a competitive edge in terms of product pricing. In 8M2014, total sales volume of VSA
members reached 1.18 million tons, up 29.1% y-o-y, in which export volumes surged by 51.9%
y-o-y to reach 520 thousand tons, accounting for 44% of total sales volumes. In contrast,
domestic sales volumes reached 663 thousand tons, increased by 15.6% y-o-y.
The main client group of steel sheets is individual contractors, especially in suburban areas,
which are less vulnerable to changes in prices than contracts for big

www.VPBS.com.vn

Page I 4

construction sites. Moreover, their bargaining power is low. However, as steel products are becoming more
standardized, individual customers have the power of switching to another brand without much switching cost.
The market, therefore, is a highly competitive one as there are several FDI firms (Blue Scope Steel, Sun Steel,
and most recently China Steel Sumikin) operating in this segment. These firms have a certain advantage in
terms of economy of scales and advanced technology. Despite these, the steel sheet segment still holds
potential for domestic companies that can offer high-quality products with reasonable prices and especially have
good relationships with local contractors.

Steel pipes
The steel pipe segment witnessed the participation of many companies specializing in the steel sheet segment
but wanting to diversify their product offerings, as in the case of Hoa Sen Group which entered the steel pipe
segment in 2009 and Nam Kim Group which entered in 2012. These companies are more capable with raw
material sourcing and possess advanced technology, which poses a competitive challenge for companies that
only manufacture steel pipe.
Steel pipe plays an important role in engineering construction and industrial production. As the size of the steel
pipe segment is particularly small compared to the steel sheet segment, the gap between supply and demand is
not prominent, this segment can absorb the extra production volume even when existing firms expand capacities
or new firms enter the market.
In 8M2014, sales volumes of VSA members reached 681 thousand tons, up 32% y-o-y. Specifically, export
volumes reached 103 thousand tons, down 20% y-o-y; in contrast, domestic sales volumes increased sharply by
49% to reach 577 thousand tons, accounting for 85% of total sales volume. Part of the reason for the declining
growth rate in export volumes is rising anti-dumping lawsuits in export markets (the United States and Canada).
However, we do not believe this is a major concern for steel pipe producers as their export volumes only account
for a small portion of their total sales volumes (3.2%). Moreover, steel pipe producers' target export markets are
mostly within the South East Asia region due to Vietnam's geographic location.

Material price trend

Global HRC prices fluctuated significantly during 2014 but generally trended downward. In 1Q2014, in China, the
decline in iron ore prices dragged down HRC price despite the slight improvement in demand and inventory
reduction, in particular, HRC price declined from USD530-540/ton FOB in January to USD520/ton FOB in March.
In the beginning of 2Q2014, HRC price increased in the first two weeks of the quarter to reach USD525-530/ton
FOB. However, from the end of April, slowing domestic prices and tightening monetary policy coupled with weak
demand, declining ore prices still put the market in a downward trend as buyers are not willing to pay higher
prices. Export prices fell continuously during the quarter and adjusted to reach USD505-515/ton FOB by the end
of 2Q2014. By the beginning of August, HRC prices remained stable but adjusted downward slightly by the end
of the month to reach USD500 to 508 per ton FOB.

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Page I 5

HOA SEN GROUP (HSG)

HISTORY
Formerly a steel sheet retail outlet, Hoa Sen JSC - the precursor of Hoa Sen Group, was founded in 2001 with
an initial chartered capital of VND30 billion, 22 employees, and three retail branches.
The Group currently specializes in producing steel sheets - steel pipes and other construction materials to
serve industrial production and civil construction.
The Group's main strategy focuses on:
(1) Advanced technology and integrated manufacturing processes to produce high quality products at
competitive prices.
(2) Expanding its nationwide distribution network to sell products to end-users.
(3) Building a friendly and community-oriented brand.
Development timeline
Hoa
capital

2001
2006
2007

2008

FY200
9
FY2010

Sen JSC, the precursor of Hoa Sen Group, was established with an initial charter
of VND 30 billion
Established Hoa Sen Steel Sheet JSC

Established Hoa Sen Building Materials JSC and Hoa Sen Engineering Construction JSC.
Hoa Sen JSC was renamed as Hoa Sen Group
Signed an agreement with Gemadept JSC to establish Hoa Sen Gemadept International Port & Logistics JSC
Listed 57,038,500 shares on Ho Chi Minh City Stock Exchange.
Started construction of Phase 1 of Hoa Sen Phu My Steel Sheet Plant

Increased chartered capital from VND570billion to VND1,008billion

FY2012

FY2013

Export sales achieved USD 252 million

Implementing Phase 2 of Hoa Sen Phu My Steel Sheet Plant

FY2011

FY2014

Inaugurated Phase 1 of Hoa Sen Phu My Steel Sheet Plant.

Export sales achieved USD 101 million
The export sales achieved USD 180 million.
Inaugurated the first franchise agency at Dak Nong.

Inaugurated Phase 2 of Hoa Sen Phu My Steel Sheet Plant

Source: HSG

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Page I 6

Chartered capital (VNDbn)

1.008 1.008 1.008 1.008 1.008

Source: HSG

ORGANIZATIONAL STRUCTURE AND MANAGEMENT

GENERAL ASSEMBLY OF
SHAREHOLDERS
>

<
f

-------------

BOARD

OF

SUPERVISIORY

BOARD OF DIRECTORS

LEGISLATION &
ADMINISTRATIVE
DIVISION

>1

BOARD OF MANAGEMENT
FUNCTIONAL
DIVISIONS

>*

SUBSIDIARIES & ASSOCIATED

COMPANIES

HOA
SEN PHU
RETAIL
NETWORK

MY
STEEL
SHEET

Source: HSG

www.VPBS.com.vn

PLANT

HOA SEN STEEL

SHEET ONE MEMBER
LTD

HOA SEN
BUILDING
MATERIALS
ONE
MEMBER LTD

HOASEN
TRANSPORTATION &
ENGINEERING ONE
MEMBER LTD

HOA SEN NGHE AN

HOA SEN BINH DINH

STEEL SHEET ONE

STEEL PIPE ONE

MEMBER LTD

MEMBER LTD

HOA SEN
GEMADEPT
LOGISTICS &
INTERNATIONAL
PORT JSC

BRANCH

Page I

The Group owns a retail network consisting of 133 branches and six base depots and manages
the Hoa Sen Phu My Steel Sheet Plant.
The Group has five subsidiaries in which it holds 100% ownership:

Hoa Sen Steel Sheet One Member Limited Liabilities Company

Hoa Sen Building Material One Member Limited Liabilities Company
Hoa Sen Transportation & Engineering One Member Limited Liabilities Company
Hoa Sen Nghe An Steel Sheet One Member Limited Liabilities Company

Hoa Sen Binh Dinh Steel pipe One Member Limited Liabilities Company

|n 2008, the Group partnered with Gemadept Corporation to build Hoa Sen
Gemadept Logistics & International Port in the Cai Mep - Thi Vai port, in which the

Divestment from non-core

project to focus on construction
material business.

Group contributed 45% capital and Gemadept contributed 51%. The revised total investment
capital was reduced to USD30 million instead of USD63 million per initial plan. By the end of
FY2013, the access road leading to the port and the port's design had been completed. The
Group thus far has disbursed VND44.45 billion and is now seeking partners to transfer its
holding as the Group decided to focus on its core business.
I Name I

Board of Directors
Mr. Le Phuoc Vu

I Title

I Experience/Degree

1 Ownership
1

Chairman

12 years building and developing the Group

16.47%

Mr. Tran Ngoc Chu

Vice Chairman

25 years of experience in finance, accounting, taxation, governance

0.09%

Mr. Pham Gia Tuan

Mr. Jean-Eric Jacquemin
Mr. Tran Quoc Tri

Member
Member
Member

10 years of experience in taxation, accounting

25 years of experience in restructuring leading corporation in US, Europe 0.00%
Bachelor of Accounting and Auditing

0.00%

Board of Management
Mr. Tran Ngoc Chu

General Director

25 years of experience in finance, accounting, taxation, governance

0.09%

Mr. Hoang Duc Huy

Deputy General Director

25 years of experience in organization control

0.01%

Mr. Tran Quoc Tri

Mr. Vu Van Thanh
Mr. Nguyen Minh Khoa
Mr. Nguyen Van Quy

Deputy General Director

Deputy General Director
Deputy General Director
Deputy General Director

Bachelor of Accounting and Auditing

Master of Development Economics
Master of Business Administration
Bachelor of Business Administration and Electricity

0.00%
0.02%
0.01%
0.00%

Mr. Ho Thanh Hieu

Deputy General Director

Bachelor of Accounting and Auditing

0.00%

Supervisory Board
Mr. Le Vu Nam
Mr. Ly Van Xuan
Mr. Le Dinh Hanh

Head of Supervisory Board

Member
Member

Doctorate in Economics Law

Associated Professor and Doctor of Medicine
Bachelor of Finance-Currency-Credit

0.01%
0.09%
0.00%

0.00%
I

Source: HSG

The Group's management team is well-experienced and has worked for the Group for many
years. Mr. Le Phuoc Vu, Chairman, has contributed significantly to the leadership and strategic
development of the Group. In the early days, when HSG first started out as a steel sheet
retailer, it faced challenges from many competitors who were more financially capable.
Accordingly, Mr. Vu decided to set his own strategic development for the Group. As someone
who has ample understanding of the domestic market, he realized that the development of a
retail network to distribute products directly to end-users without going through middle channels
plays a key role in the success of the Group and that the undertaking was necessary in spite of
the significant investment of time and capital required.

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Page I 8

Major shareholders
(>1%)
Tam Hy One Member Ltd

Number
of
22,000,000
shares

Red River Holdings

16,420,679

22.84%
17.05%

Mr. Le Phuoc Vu
Deutsche Bank AG London

15,867,152
6,691,923

16.47%
6.95%

Tam Thien Tam One Member Ltd

5,650,000

5.87%

Deutsche Bank Aktiengesellschaf

4,822,123

5.01%

Epsom Limited

2,920,600

3.03%

SHAREHOLDERS AND OWNERSHIP

Ownership structure as of August 22, 2014

^_Red River Holdings 17,1%

Ownership
ne Bank
Others
30,8%

Mr. Le Phuoc Vu, Chairman,

controls nearly 40% of the voting
shares of HSG.

Source: Company data

)nd0n

Mr.Le Phuoc Vu

16.5%
Tam Hy One
Member Ltd
22.8%

Since its inception, HSG's shareholder structure

has
been
concentrated as the percentage
of ownership
Tam Thien Tam One Member
of the Board of Directors (mainly
Mr. Le Phuoc
Ltd 5.9%
Deutsche AG
Vu) fluctuated between 38% and
44%. However, this structure saw
London 7,0%
major change in 2014 when Mr. Source: Company data
Le Phuoc Vu sold 24 million
shares in March 2014 and
another 3 million shares in July
2014 through agreement transactions. After the transaction, Mr. Vu owns 16.5% of the Group's
shares, down from 44.5%, and becomes the third largest shareholder. Meanwhile, Tam Hy One
Member Ltd., a newly established company where Mr. Vu is Chairman and Managing Director,
successfully bought 21 million shares in April and one million shares in August 2014 and is
currently the largest shareholder. Mr. Vu, therefore, effectively controls nearly 40% of the voting
shares.
The Group's shares have received much attention from many domestic and foreign institutional
investors. In the past, the shareholder structure included the participation of foreign funds such
as STIC Investments from South Korea and SSF Capital from Malaysia. These funds have
contributed significantly in strategic cooperation with HSG since 2010, which was a difficult year
for steel producers. In 2010, the Group successfully issued 11.96 million shares for the three
financial institutions (including STIC Investments) and gained VND538 billion, which provided
funding to expand production capacity and develop new products including hot dipped
galvanized steel with NOF technology.
As of July 2014, major foreign shareholders (holdings more than 1%) own 32% of the Group's
shares. One of the most prominent shareholders is Red River Holding (RRH), well-known for
their active and influential approach to investing and has made positive contributions to the
performance of the Group. At the Annual General Meeting of FY2013, Mr. Jean-Eric
Jacquemin, Chairman of the Board of Directors of Red River Holding, was elected as a member
of the Board of Directors and is responsible for the Investor Relations Sub-board and Finance
Sub-Board, further contributing to the strategic development of the Group.

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Page I 9

COMPANY OVERVIEW
A LEADING STEEL SHEET AND STEEL PIPE PRODUCER
The Group offers two core products: galvanized steel sheet and steel pipes. Galvanized steel
sheets are the most profitable segment and contribute the most to the Group's net revenues.
From FY2009 to FY2013, total sales volumes grew at a CAGR of 39.7%.
Revenues by product segments in 9M-FY14
Plastic
products
2,7%

Total selling volumes (tons)

700.000
600.000

Other
products

Steel
pipe
18,6%

500.000

GI
2,1%
Standard steel
sheet 0,5%

400.000
Purlin
300.000

200.0

Pre-painted GI
11,2%

100.000
0

FY2009

FY2010

FY2011

FY2012

Source: Annual report, VPBS analysis

FY2013

9M-FY14

Pre-painted
CRC
1,0%
Source: Annual report, VPBS analysis

Pre-painte
GL
14,2%

Galvanized steel sheet (current designed capacity: 1.2 million tons/year)

The Group has been a leader in the
galvanized steel sheet segment
since 2008. However, its recent
market share saw slight decline due
to fierce competition.

HSG's products

From FY2008 to FY2013, sales volume of galvanized steel presented a CAGR of 36.7%. This
segment includes galvanized steel sheet (GI), galvalume steel sheets (GL), pre-painted
galvanized steel sheets (pre-painted GI), pre-painted galvalume steel sheets (pre-painted GL)
and pre-painted CRC and hot dipped galvanized steel (HGI). From FY2009 to FY2013, this
segment contributed from 78% to 85% to the Group's net revenues, however, this segment
accounted for a slightly lower portion of net revenues of 74% in 9M-FY2014.
HSG maintains its leading position in the galvanized steel market, its market share far exceeds

Cold rolled coil

Aluminum-Zinc alloy coated steel sheet Hot dip galvanized steel

Applying the modern 6 high single-stand reversing

Manufactured by the NOF technology Highly anti-erosion,

Apply the advanced NOF technology Meet

cold rolling technology Standard: JIS G3141

effectively heat-resistant and flexibly designed Standard: JIS

diversified requirements in industrial and civil

G3321

construction

Source: HSG

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those of other steel producers including Nam Kim, Sun Steel and Ton Phuong Nam. However,
the Group's market share has declined in the past two years due to fierce competition in the
marketplace.

Page I 10

Market share of galvanized steel producers

thousand
tons

Other

companies

Ton

Nam Kim

Phuong

share 48%

1.600

41%

1.400

34%

1.200
1.000

Sun Steel HSG market

Nam

HSG

39%

37% ^

42%

37%

36%

29%

30%

21% ^

800

24%

600

% 18%

400

** 12%

,^
**

200

**

6%

** 0%

_______________________

5~ B ~ I B ~ :

Steel pipe (current

capacity: 279,000
tons2011
per year)
2008designed
2009
2010

2012

2013

8M2014

Source: VSA. Note: Excluding sales volume of Perstima Viet Nam as its products do not serve
construction industry
HSG's galvanized steel pipe is
highly regarded by the market. The
Group gained 8M2014 market share
of 19.8% in steel pipe.

This product was launched in 2009 and contributed from 7% to 13% of net revenues from
FY2009 to FY2013. In 9M-FY2014, this segment accounted for 18.6% of net revenues.
Management attributes this to the additional capacity of steel pipe lines from the first quarter of
this financial year. This may explain the lower portion of galvanized steel sheet in net revenues
in 9M-FY2014 since additional steel sheet production lines operated later in the year than the
steel pipe lines.
This product segment includes black steel pipe and galvanized steel pipe, which enjoys strong
demand and is a highly regarded product. From FY2009 to FY2013, sales volume of steel pipes
achieved a remarkable CAGR of 50.7%. Despite the late entry into this competitive segment,
the Group's steel pipe competes well with other well-known producers such as Hoa Phat and
Seah VN. Its market share grew rapidly throughout the year to capture 19.8% in 8M2014, up
from 14.5% in 2013. This is a remarkable achievement considering that the steel pipe market is
fragmented and the level of competition is much fiercer than the galvanized steel market.
Market share of steel pipe producers
Other companies i
Hoa Phat
i Viet Duc
i HSG

20%
14%

8%
5%

10%
g

11%

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Page I 11

H SeAH VN HSG
market share

720

20%

540

15%

360

10%

180

5%

0%
2009

2010

201
1

2012

2013

8M2014

Source: VSA

thousand tons 900

25%

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Page I 12

Others products:
The Group will continue to focus on
core segment. Management expects
revenue from other products segment
to gradually decline in the future.

Other products include plastic pipe and purlin which contribute around 8% of the revenue structure
from FY2009 to FY2013. According to management, these products have lower margins then its
core products (galvanized steel and steel pipe), moreover, the Group has not expanded the
capacity of these production lines since FY2008. Following the strategy to prioritize manufacturing
core products which are more profitable, it is expected that the growth rate of revenue from these
products will gradually decline in the coming years.

CAPACITY EXPANSION TO DRIVE GROWTH

Hoa Sen Group's cold rolling line gets its main input materials of hot-rolled coil (HRC) from Asian
countries such as Japan, South Korea and Taiwan. HRC that goes through this line will in turn be
used for cold rolled coil (CRC).
CRC is the input material for galvanizing lines to produce steel sheets, or it could go through an
annealing furnace and slitting line and transfer to steel pipe line to produce steel pipe products.
HSG products meet international quality standards of the United States, Australia, and Japan. In
addition, HSG is the first company in Vietnam to adopt NOF technology to produce galvanized
Main production lines
Main production line

HSG's manufacturing process

No. of lines Designed capacity

Hoa Sen Group (in Binh Duong)

tons/year

Galvanizing line

Color coating line

Hoa Sen Phu My Steel Sheet Plant-Phase 1 (in Ba Ria -

1 50,000
90,000
Vung Tau)

Pickling line

700,000

Cold rolling line

400,000

Hot galvanizing line

450,000

Galvanizing line

100,000

Color coating line

180,000

Annealing furnace

142,000

Acid recycling line

5,000l/hr

Hoa Sen Phu My Steel Sheet Plant-Phase 2 (in Ba Ria -

Vung Tau)

Galvanizing line

Hot galvanizing line

120,000
400,000

Color coating line

1 50,000

Cold rolling line

400,000

Pickling line

250,000

Cold rolling line

180,000

Annealing furnace

Hoa Sen Steel Sheet One Member LLC (in Binh Duong)

Hoa Sen Building Materials One Mem ber LLC (Ba Ria

42,000
Vung Tau)

Steel pipe line

10

101,000

Steel pipe line

41,000

uPVC pipe line

12

30,000

Branch of HS Building Materials One Member LLC (Binh Duong)

Steel pipe line

66,000

Branch of HS Building Materials One Member LLC (Hai Duong)

Steel pipe line

71,000

Total
Color coating line

980,000

Galvanizing line

370,000

Hot galvanizing line

850,000

Color coating line

420,000

Steel pipe line

279,000

steel sheets, which can create durable products with exceptional quality at a low cost.

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Page I 13

Source: HSG

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Page I 14

Completion of Phase 2 of Hoa Sen

Phu My Steel Sheet plant enables the
Groups

to

source

its

own

materials.

CRC

The Group has two production plants; one in Binh Duong and one in Ba Ria - Vung Tau. The plant
in Binh Duong has operated since 2004, with galvanized capacity of 150,000 tons per year; and
color coating capacity of 90,000 tons per year.
The large scale production plant in Ba Ria - Vung Tau was constructed in 2010 under the name of
Hoa Sen Phu My Steel Sheet Plant. The plant has a total investment of VND3,071 billion, with a
total area of 16.7 ha, including 87,542 sqm for its workshop and 690 sqm for its office, an 110KV
transformer station and water recycling system.
Phase 1 of the Hoa Sen Phu My Steel Sheet Plant includes the following production lines: cold
rolling lines of 400,000 tons per year; hot galvanized line of 450,000 tons per year; galvanized
lines of 220,000 tons per year; and color coating line of 180,000 tons per year.
After the completion of Phase 1 in 2011, the total capacity of galvanized steel products reached
820,000 tons/year. However, its cold rolling lines only had combined capacity of 580,000
tons/year.
In 2013, the Groups started the construction of phase 2 with a total investment of VND1,344
billion, which is financed by long-term debt and retained earnings. The project was completed in
August 2014. By then, HSG's production capacity had increased significantly as cold rolling
capacity reached 980,000 tons/year; galvanized capacity reached 1,220,000 tons/year; color
coating capacity reached 420,000 tons/year. The Group's vertical investment to integrate the value
chain has essentially been completed.

The Group's CRC production line is

the second largest in Vietnam. The
Group can set competitive price
thanks to economies of scale.

It's worth noting that Phase 2 of the project will enable HSG to source 100% of its CRC needs,
therefore, it will only need to import HRC. Being able to fully self-supply CRC is a major advantage
when compared to its peers, who still depend on imports of CRC. The import tax rate of CRC is
7%, while that of HRC is 0% (according to CEPT commitments - Common Effective Preferential
Tariff). In addition, with designed capacity of 980,000 tons/year, HSG's cold rolling lines will be the
second largest after Posco (1.2 million tons/year) and about five times the capacity of Nam Kim
Group (200,000 tons/year) and Dai Thien Loc (200,000 tons/year).
When the new cold rolling lines are put into operation in FY2014, it will take some time for the
testing period before the production lines can reach their fully designed capacity. If we assume that
the utilization rate of the cold rolling lines is 75% in FY2015, then the amount of import duty that
the Group can save from being able to self-produce CRC is: 980,000 (designed capacity) * 75% *
USD655 (CRC price) * 7% (import tariffs) = USD33.7 million. This allows the Group to set more
competitive prices both thanks to economies of scale and preferential tax rates.
According to its development strategy with a vision to FY2018, when its sale volumes reached one
million tons, the Group expects to implement a hot-rolled strip mill project to further integrate its
value chain. However, after discussions with management, we learned that the Group chose not to
implement the project due to the substantial investment capital requirements. Meanwhile, the
Group could still buy raw materials from its traditional channels at good prices. In addition, when
the Formosa Ha Tinh project goes into operation in late 2015, the demand for imports of raw
materials will be significantly reduced as this project can provide the domestic market with about
3.3 million tons of hot-rolled steel, providing the Group with another source of raw materials.

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Page I 15

NATIONWIDE RETAIL NETWORK TO DELIVER PRODUCTS TO END

USERS
Retail networking expansion (HSG's target)

Revenues breakdown by channels in FY2013

Subsidiaries

Source: Annual report

Source: Annual report

Retail branches to deliver products to

end-users enables the Group to
capture the fullest margin and adapt
to changing market conditions.

The Group's strategy is to directly sell its products to end-users through its own retail network, which is widespread
throughout the country. With centralized management establishing general policies, the Group imposes strict quality
control over the products it provides to their final consumers. This is an important competitive advantage of the Group as
most steel producers do not have their own distribution network and rely mostly on independent distributors. This
strategy, however, does not add value for the company as it needs to offer discount and promotion programs to the retail
outlets to encourage them to increase sales volume.
Through its own retail network, HSG can actively adjust its selling price to adapt to market
conditions. Specifically, in the context of plummeting raw materials price as occurred in 2009,
steel producers had to reduce the selling prices of their finished products while using high cost
raw materials, which eroded their profits. To counter this problem, HSG rapidly sold its products
through its own retail network while adopting flexible selling prices, then use the proceeds to
purchase the currently cheaper raw materials. Whereas other steel producers were stuck with
mounting inventories as they relied on other retail outlets.
The retail network accounts for around 33% of total revenues. The Group targets to have a total
of 188 branches by the end of FY2018 and aims to build 15 branches each year. The six base
depots play an important role in reducing inventories that need to be maintained at the retail
branch and reducing the pressure to borrow shortterm loans to finance the inventory.
After meeting with management, we learned that when the Group opens a new retail branch, it
mainly rents land instead of buying in order to take advantage of existing infrastructure. Thus
the cost of opening a new branch is estimated at VND4 billion.

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Page| 16

SALES GROWTH TO BE FURTHER DRIVEN BY EXPORTS

Galvanized steel production technology is not overly complex, the main factors that differentiate
a product of a company are the input costs such as labor and electricity in which HSG has a
competitive edge on the export markets as it benefits significantly from low labor costs.
Domestic and export volumes

=6= --- 1 - ---------1 -- ---- --- 1 - ---- ----1 -- 1 --- --- 1 - 1--- ----1
FY2009 FY2010 FY2011 FY2012 FY2013 9M-FY14
Source: Annual reports

Export revenues (USDmn)

0 1--------------- 1--------------1 ------------- 1 ------------- 1------------- 1 ------------FY2009

FY2010
FY2011
FY2012
FY2013
9M-FY14
Source: Annual reports

HSG has built a strong reputation in the export markets as the last two years have witnessed
significant increases in both export volume and value. From FY2009 to FY
2013, the export revenues and export volume grew at CAGR of 161% and 158%, respectively.
The proportion of export revenue as a percentage of total revenue increased from 3.4% in
FY2009 to 41.1% in 9M-FY2014.
Export is good sales channel in times of

The Group is seeking to diversify its export markets to reduce reliance on some markets. HSG
exports most of its products to ASEAN countries to serve the construction industry. The Group
main drawback is anti-dumping lawsuit in
expects to reap benefits from the lowering of intraregional tariffs through the Common Effective
export markets.
Preferential Tariff (CEPT) Scheme for Asean Free Trade Area. However, it is difficult to quantify
these benefits as HSG's products will be up against its counterparts from other Asean countries. Moreover, ASEAN
countries could still initiate anti-dumping investigations should a large quantity of products with cheap prices flood into
their country.
slowdown in domestic consumption. The

HSG also plans to boost more exports to major markets in other regions such as the U.S.,
Australia and Europe. These markets are highly demanding in terms of product quality,
moreover, high transportation costs and prolonged transit time are also challenging factors that
the Group needs to take into account when choosing to export to these markets.
Maintaining high sales volume is the Group's priority and boosting exports will be the main
growth driver to keep sales volumes going. Exports yield lower profit margins due to high
transport costs, however, help HSG to maintain their high sales volume during the off-season
construction period, particularly the first quarter (Lunar New Year) and third quarter (rainy
season). In addition, the Group will gain revenue in foreign currency, which helps reduce its
exposure to exchange rate risks.

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Page| 17

HSG can compete directly with big companies in the region as its products are internationally certified and price
competitive. Further, Vietnam's geographic location in the region can help the Group ship large orders quickly to other
ASEAN countries.
However, The Group may face two major challenges:
Fluctuations in exchange rate.
The Group needs to heavily borrow in USD to import raw material, thus any unfavorable movements in VND/USD
exchange rate will have a major impact on the Group's bottom line.
However, the Group will also benefit from this currency depreciation as it receives export revenues in dollars.
The Group's USD-denominated loan accounts for 70 - 80% of total outstanding loans and the interest rate differentials
between the USD and VND loans are about 4% -6% per year. Therefore, even if the VND depreciates, the Group's
interest expense is still lower compared to borrowing entirely in VND.
Trade disputes in the export market.
Trade dispute is a concern for steel companies exporting to ASEAN countries. Many steel associations in other countries,
such as Thailand and Malaysia, filed letters of complaint regarding the mounting steel imports from Vietnam. Although
these filings only convey concerns regarding possible damage to their domestic steel industries, it does reflect the high
level of protection of their steel industries.
As Vietnam's steel products are offered at attractive prices, they have certain competitive advantages in the export
market, which means that a large quantity of products with cheap prices flooding into the country could spark antidumping investigations.

FINANCIAL PERFORMANCE
COST ANALYSIS
Total production costs by factors (FY2013)
Outsourcing

SG&A and financial expenses (% net revenues)

Others
3,4%

Administrative expense/Revenues
Selling expense/Revenues

Depreciation 8.7%
1,8%
Human
resources
3,4%

FX loss/Revenues
Interest expense/Revenues

16%
14%
12%

3,0%
-3,5%-

10%
8%

'4,3%'

2,6%

4,1%

6%
4%

_2,3%_
"3,0%_
1,8%

4,2%
_2,1%_

_3,0%_

2%

~7%

,2%-

TO

,4%^^H3,5%^^a3,4%

0%
FY2009
Source: Annual report, VPBS analysis

www.VPBS.com.vn

FY2010

FY2011

FY2012

FY2013

Source: Annual report, VPBS analysis

Page| 18

The Group's cost structure is relatively stable over the years, in which, the cost of raw materials
(mainly HRC) has accounted for over 80% of total production costs, so fluctuations in the HRC
price have a major impact on the Group's profitability.
Declines in net FX loss and interest expense
Financial expenses mainly consist of interest expense and foreign exchange losses. The Group
experienced a surge in interest expense in FY2010 as interest rates started trending up after
the interest rate subsidy program ended in 2009. In addition, in 2010, the State Bank of Vietnam
devalued the exchange rate USD/VND three times. The Group has to heavily borrow foreign
currency to import raw material, HSG has to shoulder the additional costs arising from the
revaluation of its loans. From FY2012, net FX loss experienced major declines as revenue
gained from export helped the Group partly offset FX loss, moreover, interest expense also
declined thanks to the interest rate cuts.
Higher SG&A expenses than industry averages
As the Group has its own retail network and an increasing number of employees, its selling and
administrative expenses of total revenue stay fairly high above the average of the steel industry.
The Group's SG&A accounted for 6-7% of net revenue from FY2009 to FY2013, which was
higher than industry average of 3-5% of net revenue. S,G&A expenses are expected to remain
high as the Group expands its retail network, which is costly to operate as the Group has to
shoulder the additional staff cost, outsourcing services cost. In addition, the Group sponsors for
many television programs and charitable activities as part of the marketing effort to consolidate
its brand within the industry, which also push up its SG&A expenses.

GROWTH
Steady growth of revenues but unsteady net profits
From FY2009 to FY2013, net revenues exhibited remarkable growth at CAGR of 42.8%, while
sales volume during this period achieved CAGR of 39.7%, indicating that growth in revenues
was mainly driven by growth of sales volume. However, operating profits grew at slower rate
with a CAGR of 26.2% during the same period as the Group faced certain difficulties regarding
cost management.
FY2011 net profit declined by 25.3% y-o-y due to soaring raw material cost and exchange rate
losses. In addition, the rising interest rates environment and a distressed stock market made it
impossible for the bond issuance of VND500 billion, which forced the Group to resort to
borrowing loans and further pushed up interest expense.
In 9M-FY2014, the Group recorded net revenues of VND10,966 billion, up 28.1% y-o-y, fulfilling
78.3% of the management's target. The first nine months saw the sharp increase of cost of
goods sold and selling expenses. Consequently, net profits reached VND281.5 billion, down
sharply 47.7% y-o-y and fulfilling 46.9% of the target.

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Page| 19

7OO

Net revenues (VNDbn)

Net profits
(VNDbn)
6OO
I
5OO

14.000

12.000

4O

10.000

8.000

3O

6.000

4.000

2O
FY2OO9 FY2O1O FY2O11 FY2O12 FY2O13 9M-FY14

2.0

Source: Annual report, VPBS analysis

I 1OO
O

FY2OO9 FY2O1O FY2O11 FY2O12 FY2O13 9M-FY14

Source: Annual report, VPBS analysis

Current assets will account for greater portion in the asset structure
From FY2009 to FY2013, equity grew at a CAGR of 23.9% with primary contribution from
retained earnings. Total assets grew at a CAGR of 30.8%. In FY2012, current assets dropped
15% y-o-y as the Group proactively reduced inventory to pay off short-term loans.
In the assets structure, current assets accounts for a stable proportion of 50% of total assets.
However, in FY2013, current assets accounted for 59% due to 96% y-o-y increase in inventory,
which must be maintained at high level in order to meet the demand of the domestic and export
market.
In the past few years, the Group's most prominent investment was the Hoa Sen Phu My project.
Phase I of the project was completed in 2011 and Phase 2 was completed in 2014. The Group
stated that its vertical investment process (which focuses on completing the value chain of
production) will essentially be completed by the end of
2014. Going forward, the Group will focus on the expansion of its retail network, and possible
construction of its production plant abroad.
From FY2015, we expect the proportion of long-term assets in the asset structure to decline
after the completion of phase 2, while the proportion of short-term assets will increase due to
the increase of inventory and accounts receivable to accommodate the expansion of its
domestic and export market.
Shareholders' equity

Total assets

I I I I I
I
FY2009 FY2010 FY2011 FY2012 FY2013 9M-FY14 Source:

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Page I 20

Annual report, VPBS analysis

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Page| 21

EFFICIENCY AND PROFITABILITY

Flexible structure of USD/VND denominated loans to optimize borrowing demand
The Group uses significant short-term debts to finance its working capital while keeping cash
balances at minimum. However, the Group has a certain advantage over its peer by maximizing
the use of debts with lower borrowing costs.
In the short-term debts structure, USD denominated loans accounted for 80.6% of total
outstanding loans by the end of FY2013. Management will actively adjust the portion of USD
and VND denominated loans to take advantage of favorable interest rates. As stated in the
FY2013 annual report, interest rates for short-term interest rates of USD loans fluctuate
between 3% and 6% while that of VND loans are between 9% and 11%. The Group heavily
borrows USD loans to purchase raw materials and utilize exports revenues to pay off debts.
To better assess management efficiency in using short-term assets and liabilities to generate
cash, we use the cash conversion cycle (CCC) to reflect management policies related to
accounts payables, account receivables and inventory.
Cash conversion cycle of HSG

Cash conversion cycle of steel companies

250
200
150
79

Payable days outstanding Inventory

days outstanding Receivables days

24

100

K*

FY2011 FY2012 FY2013

outstanding Cash conversion cycle

50
0

0
19

Source: Annual
report, VPBS
analysis

The
Group
offers a 15-20
day
credit

14
0
90
FY2009

FY2010

40
Source: Annual report, VPBS analysis
-10
-60

FY2011

1I
HPG POM NKG VGS DTL TLH | HSGj

policy for its customers and major partners, the receivables

days outstanding staying relatively stable over the years
reasonably reflects this policy.
FY2012

FY2013

CCC surged to 117 days in FY2010 as inventory days outstanding peaked at 133 days, which
was due to the mounting of raw material inventories caused by the rotational power cut from 6
to 8 days in three consecutive months amidst construction season. CCC was shortened
significantly in FY2012 as the Group started to boost export activities, thereby rapidly reducing
inventories. The Group can also utilize its good relationship management with supplier to
extend payable days to accommodate sufficient working capital.
In FY2013, CCC of listed steel companies in Vietnam averaged around 98 days, which was
higher than that of 79 days of the Group. We believe this is a direct result of sustainable and
high sales volume, providing a stable source of revenue, therefore, the liquidity risk of the Group
is still manageable.

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Page| 22

ROE and ROA

Dupont analysis
> Asset turnover

ROE ROA

Asset/Equity

8x

30%

Net profit margin

6,69%

8%

25%
6x

20%
4x

15%

6%

4,94%

>440%
-^ST ------------------------------ 3,3 -------- 3,65%X^,2
2,7

2,6

4%

>2,6

-------

10%

--------------- --- ------------- --1,2 1,4 1,6

5%

FY2009

0%
FY2009

FY2010

FY2011

FY2012

FY2010

FY2011

2%
1

FY2012

1,9

FY2013

0%

FY2013
Source: Annual report, VPBS analysis

Source: Annual report, VPBS analysis

ROE and ROA experienced steep declines from FY2009 to FY2011 as equity and asset
increased significantly following the implementation of the Hoa Sen Phu My project (Phase 1)
while net profits did not keep up with the same growth. ROE and ROA hit the lowest in FY2011
due to deteriorating net margin in the context of the economic downturn. However, such profit
margin was still higher than the average of the steel industry in such a difficult year as in
FY2011.
Higher gross profit margins than other galvanized steel producers; gross margin
worsened in 9M-FY2014
The Group's gross margin dropped to its lowest in FY2011, reflecting the challenging macro
environment in which it operated, and recovered steadily through FY2013, by which time gross
margin improved to 14.5%.
Moreover, we saw that gross margin of HSG was higher than other galvanized steel and steel
pipe producers like NKG and VGS. The past two years saw the industry landscape become
increasingly competitive, most steel companies' gross margin declined as they had to lower
selling prices to maintain market share.
HSG follows the "just in time" inventory management technique closely, meaning that it only
buys just enough raw material inventory for their production plan. However, it still monitors
closely the movement of HRC prices and will actively speculate on raw material if the price
movement is favorable. The Group imported substantial amount of HRC in the last few months
of 2013 in anticipation of bounce back in HRC price once global economy outlook improves.
However, HRC price still proceeded on a downtrend, consequently, the use of high cost raw
material inventories coupled with lower selling prices depressed gross margins in 9M-FY2014 to
11.4% from 15.9% in 9M-FY2013.

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Page| 23

Gross margin of galvanized steel & steel pipe producers HSG's profit margins
HSG

NKG

Gross margin Operating margin

VGS

EBITDA margin
PBT margin

25%
20%
15%
10%
5%
0%
FY2009 FY2010 FY2011
Source: Annual report, VPBS analysis

FY2012

FY2013

9M-FY14

Source: Annual report, VPBS analysis

LIQUIDITY AND SOLVENCY

Liquidity ratios

1 Cash
H ratio

FY2OO9
O.O4x

FY2O1O
O.O2x

FY2O11
O.O4x

FY2O12
O.O3x

FY2O13
O.O4x

Current ratio

1.O4x

O.96x

O.88x

O.97x

O.97x

Quick ratio

O.4Ox

O.36x

O.3Ox

O.4Ox

O.28x

Total debt/Equity

1.17x

1.29x

1.63x

1.31x

1.54x

Total debt/Total assets

O.45x

O.49x

O.49x

O.5Ox

O.48x

Debt/EBITDA

2.42x

3.O5x

3.78x

2.57x

2.94x

Debt/EBIT

3.21x

3.87x

5.19x

3.49x

3.93x

EBITDA/Int. Exp.

5.63x

4.36x

2.66x

3.O3x

6.89x

EBIT/Int. Exp.

4.24x

3.45x

1.94x

2.23x

5.16x

Source: Annual report, VPBS analysis

Despite its strong growth in revenues, the Group keeps its cash at minimum to accommodate
on-going business operations, therefore, the cash ratio stays low from 0.2x to 0.4x. Current ratio
and quick ratio worsened slightly as a result of increasing short-term borrowing to finance its
working capital, mainly inventories.
Total debt to equity and other solvency ratios deteriorated especially in FY2011 due to
substantial borrowing that was used to finance its Hoa Sen Phu My Steel Sheet Plant project
amidst rapidly rising interest rates. These ratios improved in FY2012 as the Group increased its
export revenues to partially finance for its operations. From FY2013, the Group implemented
Phase 2 of Hoa Sen Phu My Steel Sheet project, as the project was mostly financed with longterm borrowings, we expect the Group's interest expenses to surge in the next two years.

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Page I 24

FORECAST ASSUMPTIONS
Selling volumes
Projected sales volume
Thousand tons
Galvanized steel sheet

FY2013

FY2014E

FY2015E

FY2016E

FY2017E

FY2018E

529

608

729

875

1,050

1,239

15%

20%

20%

20%

18%

186

205

225

248

273

88%

10%

10%

10%

10%

Growth (% y-o-y)
Steel pipe
Growth (% y-o-y)

99

Source: VSA, VPBS's projection

Galvanized steel sheet:

For FY2014, we project the y-o-y growth rate of galvanized and color coated steel sheet of HSG
at 1% to reach 608 thousand tons. In FY2015, higher volume growth could be achieved in
tandem with demand recovery. Possible concerns regarding growth rate include new entrances
or capacity expansion of HSG's competitors and anti-dumping lawsuits in HSG's export
markets. To reflect the impacts of these factors, we assume that the growth rate of sales
volume will slow down to reach 18% in FY2018.
Steel pipes:
For FY2014, we project the y-o-y growth rate of steel pipe at 88% to reach 186 thousand tons. It
will be difficult for HSG to maintain this high volume growth rate in FY2015 unless it has plans to
expand its production capacity. By FY2018, we expect its steel pipe lines to work at nearly full
designed capacity and it is able to sell all of its outputs.

Average selling price (ASP)

Selling price depends on supply and demand in the market and raw material prices (mainly hot
rolled coil). Raw material prices are sensitive to changes in global and domestic demand, which
are affected by economic conditions. Despite significant fluctuations in the short term, steel
prices tend to rise over the long term to reflect the prospects of the global economy and
stronger demand.
In 9M-FY2014, ASP of steel sheet segment reached VND18.4 million/ton, and that of the steel
pipe segment was VND15.2 million/ton. From FY2015, we assume that ASP will recover by 1%2% each year as commodity prices including hot-rolled and cold- rolled steel are expected to
recover gradually due to better global economic outlook after three years of downturn.

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Page I 25

Gross profit margin

USD/ton
800
1.000

HRC price

Gross margin

Gross margin (exc. Depreciation)

40%

0%
30%

200

4000

20%
-- - -- - - -- - - - -- - - -- - - - -- l t r l t r l t r l t r l t r l t r

10%
Source: Quarterly reports, Bloomberg, Note: arrows indicate the timing of speculation

HSG's gross margin was significantly influenced by major movements in HRC price since it is
fully dependent on imports of this product. Should the price movement become favorable, the
Group will see major improvements in its gross margin.
The Group publicly disclosed that it imported large amounts of HRC in April 2009 when HRC
price reached an all-time low, which should be able to satisfy nearly two quarters of production.
The cheap source of raw material boosted gross margin as high as 35% in 4Q-FY2009.
From FY2010 to FY2012, we believe the Group remained cautious and followed closely the
"just in time" model or had minor speculative activities as this period saw wild fluctuations in
HRC prices. Gross margins plummeted to stay around 10-14%. In general, it was difficult for
most steel producers to achieve gross margins as high as the period before 2009. This is
attributable to the fact that the operating environment of the steel industry took a worse turn:
high-cost raw materials coupled with significant lower selling prices to stay competitive in the
context of plummeting domestic demand and mounting inventories. This has become a longstanding issue of the industry.
In the Annual General Meeting held in January 2014, the Group stated that it imported
substantial amount of HRC to satisfy two quarters of production, however, wrong timing of
speculation depressed the Group's gross margin in 9M-FY2014 from 15.9% to 11.4% in 9MFY2013. The Group actively pushed sales through its retail channel to provide a way out for this
high cost inventory. For the final quarter of FY2014, to be on the conservative side, we
anticipate gross margin to stay unchanged at 11.4% as average selling prices are expected to
stay unchanged or may decrease in order to stimulate sales of substantial finished inventory.
Steelfirst, a leading metal industry trade publication, expects the major HRC price trend in the
remaining quarter of 2014 to stay flat or even decline slightly amid concerns that Chinese steel
producers are ramping up production in spite of sluggish demand due to the Government's
tightening measures.

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Page I 26

We recognize the difficulty in forecasting the Group's gross margin for FY2015 onwards as this
is highly dependent on the movement of HRC price and most importantly the Group's decision
on whether or not to speculate and the timing of the speculation. For the forecast period, we
expect the Group's gross margin to recover and increase by 1% per year in FY2015 and
FY2016, due to: (1) the Group is capable of fully self-supplying its own source of CRC; (2) exits
of incompetent galvanized steel producers, who are still dependent on imports of CRC; (3)
improvements in domestic steel demand, which should tip the favor in the supply side and lead
to favorable movements of steel prices.

Selling, general and administrative expenses (SG&A expenses)

SG&A expenses primarily include staff costs, office supplies and outsourcing services, among
others. In the forecast period, we expect that SG&A expenses will remain stable at 7% of
revenue as the Group pursues an aggressive expansion strategy in both domestic and
international markets.

Financial income and expense

Financial income consists of interest income and foreign exchange gains arising from cash and
accounts receivable in foreign currencies that HSG gains through export activities.
Financial expenses mainly consist of interest expense and foreign exchange losses.
Interest expenses are calculated based on the short-term and long-term outstanding loans.
Exchange rate loss arises from the revaluation of USD-denominated loans by the end of the
year. The Group has a substantial amount of USD-denominated shortterm loans. To reduce the
exchange rate risk, HSG increased export activities to partially generate sources of foreign
currency. However, export revenues only accounted for 45% of net revenue, therefore, the
Group is still exposed to substantial exchange rate risk. For the forecast period, we evaluate the
exchange rate loss arising from the revaluation of foreign currency loans by assuming that VND
depreciates by 2% each year due to incentives of the government to stimulate exports.

Tax rates
The Group has an obligation to pay income tax at the rate of 25% on taxable profit. The
provisions of the Investment Incentive Certificate allow HSG to be exempt from business
income tax for three years starting from the first year it generates a taxable profit (2004), and
they are entitled to a 50% reduction in business income tax for seven years thereafter. This
means that the Group was subject to a tax rate of 25% in 1Q-FY2014, and 22% from 2QFY2014. The corporate tax rate is set to be lowered further to 20% from FY2016.
We make the following key assumptions with regard to HSG's consolidated balance sheets:

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Days sales outstanding: remaining stable at 20 over the forecast period.

Days inventory outstanding: remaining stable at 93 over the forecast period.
Days payable outstanding: remaining stable at 42 days over the forecast period.
Current assets and current liabilities: remaining stables as percentages of related
consolidated revenues and expenses over the forecast period.
Capex. After the completion of Phase 2 of Hoa Sen Phu My Steel Sheet plant in
FY2014, the Group will have essentially finished its vertical investment process. We
assume that the Group will build 15 retail branches each year from FY2015 with capex
for each branch of about VND4 billion. In addition, HSG will spend around VND30

Page I 27

billion for the ongoing maintenance of its machinery equipment.

Borrowings: short-term borrowings remain over 20% of revenues in FY2014, and will
gradually decline from FY2015 as the Group's liquidity position improves while longterm borrowings will be gradually paid off from 2014. We expect HSG to utilize its
retained earnings to finance minor capital expenditures in the future.

VALUATION
Based on the discounted cash flow (DCF) and multiples approaches, we derived a fair value of
HSG at VND46,500 per share.
Valuation method
DCF

Fair price
40,300

Weight
40%

P/E at 15.5x

61,449

30%

18,435

TEV/EBIDTA at 8.0x

39,833

30%

11,950

Target price

(VND/share)
16,120

46,500

DISCOUNTED CASH FLOW

Our DCF model suggests a target price of VND40,300 per share Our inputs for the DCF model
are as follows:

The risk-free rate is taken from the yield of five-year local currency Government bond
yields, which is equivalent to 5.7%.
The expected market return is expected to be 15.0%.
Beta is estimated to be 1.2.
Cost of equity is estimated to be 16.7% by using the
capital
asset pricing
model (CAPM).
Weighted average cost of capital (WACC) is calculated to
be 11.3%.
Terminal growth rate is accessed to be 3%.

COMPARABLE MULTIPLES
Compared to its regional peers, we noted that HSG delivered superior 2013 ROE and ROA
and gross profit margin. Accordingly, we derived HSG's targeted P/E at 15.5x and EV/EBITDA
at 8.0x based on its regional peers.
Valuation multiples
P/E
EV/EBITDA

Relative
1.06
0.77

VN-INDEX
2014E
14.6x
10.3x

Target
15.5x
8.0x

HSG's fair value

(VND/share)
61,449
39,833

Selected regional peer

www.VPBS.com.vn

Page I 28

Company

Country

Market

Gross

cap

marflin

(USDmn)

Net margin

201
2

201
3

201
2

ROA
201
3

2012

ROE
2013

201
2

P/E
201
3

P/B

EV/EBITDA

LTM

2014E

LTM

2014E

LTM

2014E

Relative

Relative

P/E

P/B

Relative
EV/
EBITDA

Maharashtra Seamless Ltd

India

389

NA

NA

13%

9%

NA

5%

NA

5%

24.2

28.0

0.9

0.9

19.8

19.3

1.3

0.3

1.7

Welspun Corp Ltd

India

358

NA

NA

3%

NM

2%

NM

6%

NM

29.7

16.9

0.7

0.5

4.7

6.3

1.6

0.2

0.4

Ratnamani Metals & Tubes Ltd

India

372

NA

NA

9%

11%

11%

13%

23%

23%

15.8

NA

3.0

NA

8.4

NA

0.8

1.0

0.7

Jai Corp Ltd

India

291

NA

NA

20%

15%

5%

4%

5%

5%

17.8

NA

0.8

NA

14.3

NA

0.9

0.3

1.2

Uttam Galva Steels Ltd

India

189

NA

NA

1%

1%

1%

1%

7%

5%

38.6

NA

0.9

NA

8.5

NA

NA

0.3

0.7

Thai-German Products Pub Co

Thailand

140

16%

9%

5%

9%

3%

22%

6%

NA

NA

3.9

NA

NA

NA

NA

1.7

NA

International Steels Ltd

Pakistan

113

15
%
9%

9%

NM

2%

NM

2%

NM

8%

17.0

13.4

2.0

NA

8.7

NA

1.5

1.0

1.3

Tong Herr Resources Berhad

Malaysia

86

9%

12%

3%

3%

3%

3%

5%

5%

11.8

9.6

0.9

NA

6.5

5.8

0.7

0.4

0.6

India

43

NA

NA

29%

23%

21%

14%

23%

15%

15.2

NA

1.7

NA

9.1

NA

0.8

0.6

0.8

Thailand

47

5%

6%

1%

2%

5%

5%

9%

10%

22.0

NA

1.8

NA

16.1

NA

1.2

0.8

1.3

Average

9%

11%

10%

8%

7%

6%

13%

9%

21.3

17.0

1.6

0.7

10.7

10.5

1.1

0.7

1.0

Median

9%

10%

9%

5%

5%

4%

8%

6%

17.8

15.2

1.3

0.7

8.7

6.3

1.1

0.5

0.8

194 14%

15%

3.6%

4.9%

6.6%

9.3%

19%

27%

12.7

10.8

1.8

1.8

8.5

8.2

0.8

0.9

0.8

Gandhi Special Tubes Ltd

2S Metal Pcl

Hoa Sen Group

Vietnam

Data as of 9/19/2014. Source: Bloomberg, VPBS

Vietnam's listed steel companies

Company name

Market
Capital

FY2013
ROA

6M
ROE

Net sales

FY2014

Trailing

Gross profits

Net income

Debt

to

P/E

Trailing
P/B

Equity
VNDbn

26,987

% y-oy

VNDbn

% y-o-y

%margi
n

VNDbn

22.2%

13,197

59%

2,822

85%

21.4%

1,814

NM

5,416

5%

232.8

72%

4.3%

-9.1

NM

1,651

13%

110.7

219%

6.7%

47.6

950

-2%

81.8

16%

8.6%

HPG

Hoa Phat Group

POM

Pomina Steel Corp

TLH

Tien Len Steel Corp

710

6.3%

13.2%

DTL

Dai Thien Loc Corp

541

0.9%

2.6%

VIS

Vietnam - Italy Steel

448

NKG

Nam Kim Steel JSC

411

SMC

SMC Investment Trading

VGS

1,863

9.6%

VNDbn

NM

NM

11.2

% y-o-y

%margin

13.7%

0.6

9.6

2.5

NM

2.3

NA

0.8

-65%

2.9%

0.8

28.2

0.7

41%

1.2%

1.2

24.6

0.7

87%

NM

1,787

2%

118.5

-22%

6.6%

11.9

-54%

0.7%

2.0

NA

0.7

2.3%

17.1%

2,997

47%

160.5

-5%

5.4%

34.5

-14%

1.2%

2.9

8.9

1.1

301

1.0%

4.5%

5,360

8%

145.0

11%

2.7%

9.4

-50%

0.2%

3.1

18.1

0.5

Vietnam Germany Steel Pipe

277

1.1%

2.6%

1,154

-10%

53.9

5%

4.7%

14.5

245%

1.3%

0.8

12.1

0.6

TNA

Thien Nam Trading

224

5.2%

13.7%

715

0%

60.5

2%

8.5%

17.5

-9%

2.5%

1.8

6.8

0.8

HMC

Hochiminh City Metal Corp

197

2.0%

6.1%

1,114

-35%

48.2

-25%

4.3%

10.1

-2%

0.9%

1.7

9.6

0.6

DNY

DANA-Y Steel

159

0.8%

4.0%

1,061

13%

52.9

-11%

5.0%

4.1

-61%

0.4%

2.8

19.7

0.4

HLA

Huu Lien Asia Corp

93

NM

1,202

-43%

-194.9

NM

NM

32.7

NA

3.6

KKC

Produce & Trading Metal

93

6.7%

17.5%

278

92%

25.8

99%

9.3%

12.5

137%

4.5%

1.5

4.4

1.1

SSM

Steel Structure Manufacture

62

6.7%

13.0%

86

17%

11.5

50%

13.4%

4.0

62%

4.6%

0.9

5.2

0.8

BVG

Bacviet Steel

27

NM

69

-24%

13.3

-21%

19.2%

-12.5

NM

4.2

NA

0.4

NM

NM

NM

-277.8

NM

NM

Average

3.9%

10.6%

10%

34%

8.6%

26%

2.8%

4.0

13.4

1.0

Median

2.3%

13.0%

5%

8%

6.7%

-5%

1.2%

1.8

9.6

0.7

9.3%

27.5%

-8%

12%

-52%

2.6%

2.3

12.7

1.8

HSG

Hoa Sen Group

4,113

6,641

25%

792.7

170.6

Data as of 9/19/2014. Source: Bloomberg, VPBS

www.VPBS.com.vn

Page I 29

SENSITIVITY ANALYSIS
Sensitivity of WACC and terminal growth rate to a target stock price

1.0%

42,600

WACC
11.3%
11.6%
11.9%
41,600
40,600
39,700
38,800

2.0%

45,700

44,400

43,200

42,100

41,100

3.0%

49,500

48,000

46,500

45,200

43,900

4.0%

54,500

52,500

50,700

49,000

47,500

5.0%

61,300

58,700

56,200

54,000

52,000

10.7%

11.0%

Sensitivity of changes in assumptions of gross margin and selling expense to revenue

ratio to a target stock price
o

_ +J
^ (U

<D

05

to a)

% change in assumption of gross margin -1.0%-0.5%

-0.4%
23,800
39,200
54,700

0.0%
70,100

0.5%
85,600

-0.2%

19,700

35,100

50,600

66,100

81,500

0.0%

15,600

31,100

46,500

62,000

77,500

0.2%

11,500

27,000

42,400

57,900

73,400

0.4%

7,400

22,900

38,400

53,800

69,300

1.0%

Sensitivity of % USD denominated loan over short term loans and VND devaluation
against USD to a target stock price

70.6%
0.0%

www.VPBS.com.vn

% USD denominated loan over short term loans

75.6%
80.6%
85.6%
90.6%
54,300
54,300
54,300
54,300

54,300

1.0%

50,700

50,500

50,400

50,200

50,100

2.0%

47,100

46,800

46,500

46,200

45,900

3.0%

43,500

43,100

42,600

42,200

41,700

4.0%

40,000

39,400

38,800

38,200

37,600

Page I 30

TECHNICAL ANALYSIS
The technical chart shows HSG has been fluctuating around the MA50, between the highest
price at 47,000 and the lowest price at 41,500.
HSG is now trading below the MA10 and has not yet generated any uptrend signal. The trading
volume has recently been decreasing; indicating HSG is still in an accumulation phase.
Therefore, we recommend a HOLD strategy for HSG at the time of publishing report.
As of September 19, 2014
Horizon analytic
3 months highest price
3 months lowest price
Current MA50 days
Current MA100 days
Mid-term resistance level
Mid-term support level
Recommendation

www.VPBS.com.vn

HSG (VND/share)
3 to 6 months
47,000
41,500
43,900
43,900
47,000
41,500
HOLD

Page I 31

CONCLUSION
We believe the current restructuring of the steel industry to weed out incompetent producers provides a good opportunity for
companies with competitive advantages like HSG to move forward and seize additional market share. Moreover, Vietnam is
in the process of industrialization and urbanization, which should boost the demand for HSG's products.
The Group's key advantage is its ability to internally source its CRC needs. FY2014 marks a new milestone for the Group as
it will be able to source 100% of its CRC requirements thanks to the completion of Phase 2 of Hoa Sen-Phu My Steel Sheet
plant. The extensive retail network is another core competitive advantage, which allows it to deliver its product to end-users
and adopt a flexible sales program in response to changing market conditions.
We duly note that HSG still needs to import 100% of its HRC requirements, therefore, it is still exposed to the risk of HRC
price fluctuations as well as exchange rate risks. To counter these adverse effects, the Group has boosted export activities to
gain more foreign currency sources. Exports provide potential sales channels in times of slowdown in demand during the offpeak construction season. Our major concern is directed towards possible trade disputes with the Group's major export
markets.
We acknowledge the Group's leading position in the industry and its competitive advantage, however, the Group posted
disappointing 9M-FY2014 earnings results due to wrong timing of raw material speculation. All factors considered, we
recommend investors to HOLD the stock with our target price derived at VND46,500 per share.

www.VPBS.com.vn

Page I 32

1 INCOME STATEMENT (VNDbn)

2011A

2012A

2013A

2014F

2015F

2016F

2017F

2018F

8,166

10,088

11,760

15,030

17,951

21,470

25,513

29,955

66.7%

23.5%

16.6%

27.8%

19.4%

19.6%

18.8%

17.4%

7,110

8,683

10,052

13,317

15,725

18,593

22,094

25,941

Gross profits
% y-o-y

1,056
13.4%

1,405
33.1%

1,708
21.5%

1,713
0.3%

2,226
29.9%

2,877
29.2%

3,419
18.8%

4,014
17.4%

SG&A expenses

498

648

842

1,067

1,275

1,524

1,811

2,127

558
-2.6%

758
35.8%

866
14.3%

646
-25.3%

951
47.2%

1,353
42.2%

1,607
18.8%

1,887
17.4%

208

274

291

350

356

362

368

374

766

1,031

1,156

997

1,308

1,715

1,975

2,261

49

49

40

48

55

65

92

125

458
19

409
15

247
20

247
45

260
-

295
-

331
-

389
-

0
1,123
50.6%

0
1,368
21.8%

0
1,624
18.7%

Revenues
% y-o-y
Cost of goods sold

EBIT
% y-o-y
Depreciation & amortization
EBITDA
Financial income
Financial expenses
Net other incomes / (expenses)
Income from associates
Pretax profits
% y-o-y

0
168
-33.1%

Tax expense
Effective tax rate
Profits after tax
% y-o-y
Minority interest
Net income _
% y-o-y
% margin
Average number of shares (mn)
EPS (VND)
Cash dividend (VND/share)

www.VPBS.com.vn

0
412
144.3%
43

0
679
65.0%
98

4.9%
160
-25.6%

10.6%
368
129.8%

14.5%
581
57.8%

160
-25.6%
2.0%
99
1,622
500

368
129.8%
3.6%
97
3,761
1,000

0
493
-27.4%
112

164

225

274

325

22.8%
381
-34.5%

22.0%
582
52.8%

20.0%
898
54.4%

20.0%
1,094
21.8%

20.0%
1,299
18.7%

581

0
746
51.3%

381

582

57.8%
4.9%

-34.5%
2.5%

52.8%
3.2%

96

96

5,941
3,000

3,952
2,500

96
6,039
2,000

898
54.4%
4.2%
96
9,325
2,000

1,094

1,299

21.8%
4.3%

18.7%
4.3%

96
11,361
2,000

96
13,488
2,000

Page I 33

I BALANCE SHEET (VNDbn)

2011A

Cash & near cash items

128

Short term investments

Accounts receivables
Inventories
Other current assets
Current assets

464
2,016
462
3,071
2,721

Net fixed assets

Long-term investments
Goodwill
Other long-term assets
Long-term assets
Total assets
Accounts payable
Short-term borrowings
Other short-term liabilities
Current liabilities

2015F

2016F

2017F

2018F

124

137

642

1,261

2,522

607
1,540
392
2,606

548
3,020
470
4,215

14
820
3,379
501
4,838

14
979
3,990
589
5,710

14
1,171
4,718
726
7,272

2,585

2,790

3,337

3,071

2,798

2,520

2,237

59

59
69
2,649

59
62
2,358

66
2,845

72
2,717

78
2,927

69
3,465

81
3,212

59
75
2,933

5,916

59

59

59

14
1,392
5,606
963
9,235

14
1,634
6,582
1,127
11,880

5,323

7,142

8,304

8,921

10,205

11,884

14,238

1,098

484

1,318

1,515

1,789

2,115

2,514

2,951

2,254
134
3,486

2,040
169
2,693

2,814
207
4,339

3,081
350
4,946

3,231
445
5,466

3,650
559
6,324

4,082
716
7,312

4,793
934
8,678

606

588

1,002

711

431

221

102

5
611

5
593

5
1,007

5
716

5
436

5
226

5
107

3,304

4,932

5,953

6,182

6,760

7,538

8,785

1,008

1,008

1,008

1,008

1,008

1,008

1,008

452
605
(46)

452
821
(71)

452
961
(71)

452
1,350
(71)

452
2,056
(71)

452
2,957
(71)

452
4,064
(71)

Other long-term liabilities

Long-term liabilities

647

Capital surplus
Retained earnings
Others

2014F

177

58

645

Share capital

2013A

67

Long-term borrowings

Total liabilities

2012A

4,133
1,008
452
343
(20)

Equity
Minority interest

1,783

2,019

2,210

2,350

2,739

3,445

4,346

5,453

Total liabilities and equity

5,916

5,323

7,142

8,304

8,921

10,205

11,884

14,238

2014F

2015F

2016F

2017F

409
(903)

449
(103)

644
(84)

672
(83)

945
(83)
400

CASH FLOW STATEMENT (VNDbn)

2012A

2013A

Cash from operation activities

Cash from investing activities

249
(775)

452
(56)

221
(479)

Cash from financing activities

606

(456)

373

440

(334)

(55)

30

Net changes in cash ____________

Beginning cash balance

81
50

(59)
128

115
67

(54)
177

13
124

505
137

618
642

1,261
1,261

(2)

(2)

(5)

2,522

Exchange rate fluctuation

Ending cash balance
Free cash flow

www.VPBS.com.vn

2011A

128
(529)

67

177

124

137

642

1,261

392

(264)

(489)

359

554

582

2018F

855

Page I 34

1 RATIO ANALYSIS

2011A

2012A

2013A

2014F

2015F

2016F

2017F

2018F 1

Price to earnings (P/E)

Price / earnings to growth (PEG)

7.2x
0.1x

10.8x
(0.3x)

7.1x
0.1x

4.6x
0.1x

3.8x
0.2x

3.2x
0.2x

Current EV to EBIT
Current EV to EBITDA
Price to sales (P/S)

9.5x
7.1x
0.3x

12.7x
8.2x
0.3x

8.6x
6.3x
0.2x

6.1x
4.8x
0.2x

5.1x
4.2x
0.2x

4.4x
3.6x
0.1x

Valuation ratios

Price to book (P/B)

Dividend yield

1.2%

2.3%

1.9x
7.0%

1.8x
5.4%

1.6x
4.3%

1.2x
4.3%

1.0x
4.3%

0.8x
4.3%

12.9%
9.4%
6.8%

13.9%
10.2%
7.5%

14.5%
9.8%
7.4%

11.4%
6.6%
4.3%

12.4%
7.3%
5.3%

13.4%
8.0%
6.3%

13.4%
7.7%
6.3%

13.4%
7.5%
6.3%

2.0%
3.1%
9.2%

3.6%
6.6%
19.4%

4.9%
9.3%
27.5%

2.5%
4.9%
16.7%

3.2%
6.8%
22.9%

4.2%
9.4%
29.0%

4.3%
9.9%
28.1%

4.3%
9.9%
26.5%

1.9x
0.7x
61.9%
162.6%

2.2x
2.6x
56.7%
131.1%

5.2x
1.8x
60.6%
153.9%

3.8x
0.9x
63.5%
173.7%

5.4x
4.9x
59.0%
143.9%

6.8x
5.9x
54.2%
118.5%

7.2x
6.3x
49.7%
99.0%

7.2x
6.4x
47.3%
89.8%

1.4x
17.6x

1.9x
16.6x

1.6x
21.4x

1.8x
18.3x

2.0x
18.3x

2.1x
18.3x

2.1x
18.3x

2.1x
18.3x

6.5x
3.5x
0.9x
0.3x

17.9x
5.6x
1.0x
0.4x

7.6x
3.3x
1.0x
0.3x

8.8x
3.9x
1.0x
0.3x

8.8x
3.9x
1.0x
0.3x

8.8x
3.9x
1.1x
0.4x

8.8x
3.9x
1.3x
0.5x

8.8x
3.9x
1.4x
0.6x

Profitability ratios
Gross margin
EBITDA margin
Operating margin
Net profit margin
Return on avg. assets
Return on avg. equity
Leverage ratios
Interest coverage ratio (EBIT/I)
EBITDA / (I + capex)
Total debt/capital
Total debt/equity
Liquidity ratios
Asset turnover
Accounts receivable turnover
Accounts payable turnover
Inventory turnover
Current ratio
Quick ratio

www.VPBS.com.vn

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GUIDE TO RATINGS DEFINITION

VPBank Securities (VPBS) uses the following ratings system:
Buy: Expected return, including dividends, over the next 12 months is greater than 15%. Hold:
Expected return, including dividends, over the next 12 months is from -10% to +15%. Sell: Expected
return, including dividends, over the next 12 months is below -10%.

CONTACT INFORMATION
For further information regarding this report, please contact the following members of the
VPBS research department:
Barry David Weisblatt
Head of Research barryw@vpbs.com.vn
Luu Bich Hong
Director - Fundamental Analysis
honglb@vpbs.com.vn

Chau Hao Nhi

Research Assistant
nhich@vpbs.com.vn

For any questions regarding your account, please contact the following:
Marc Djandji, CFA
Head of Institutional Sales and Brokerage & Foreign Individuals marcdjandji@vpbs.com.vn +848 3823
8608 Ext: 158
Ly Dac Dung
Head of Retail Sales and Brokerage
dungld@vpbs.com.vn
+844 3974 3655 Ext: 335
Vo Van Phuong
Director of Retail Sales and Brokerage
Nguyen Chi Thanh 1 - Ho Chi Minh City
phuongvv@vpbs.com.vn +848 6296 4210
Ext: 130

Domalux
Director of Retail Sales and Brokerage
Nguyen Chi Thanh 2 - Ho Chi Minh City
domalux@vpbs.com.vn +848 6296 42l0
Ext: 128

Tran Duc Vinh

Director of Retail Sales and Brokerage
Lang Ha - Ha Noi vinhtd@vpbs.com.vn
+844 3835 6688 Ext: 369
Nguyen Danh Vinh
Associate Director of Retail Sales and
Brokerage Le Lai - Ho Chi Minh City
vinhnd@vpbs.com.vn +848 3823 8608
Ext: 146

www.VPBS.com.vn

Page I 36

DISCLAIMER

Hanoi Head Office

362 Hue Street,
Hai Ba Trung District, Hanoi T +84 (0) 4 3974 3655 F - +84 (o) 4
3974 3656
Ho Chi Minh City Branch
76 Le Lai Street,
District 1, Ho Chi Minh City T - +84
(0) 8 3823 8608 F - +84 (o) 8 3823
8609
Danang Branch
112 Phan Chau Trinh Street, Hai
Chau District, Danang T - +84 (0)
511 356 5419 F - +84 (0) 511 356
5418

www.VPBS.com.vn

Research report is prepared and issued by VPBank Securities Co. Ltd. ("VPBS"). This report is not
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Each research analyst involved in the preparation of a research report is required to certify that the views
and recommendations expressed therein accurately reflect his/her personal views about any and all of the
securities or issuers that are the subject matter of this research report, and no part of his/her
compensation was, is and will be directly or indirectly related to specific recommendations or views
expressed by the research analyst in the research report. The research analyst involved in the preparation
of a research report does not have authority whatsoever (actual, implied or apparent) to act on behalf of
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Any research report is provided, for information purposes only, to institutional investor and retail clients of
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The securities in a research report may not be suitable for all types of investors and such reports do not
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VPBS and its affiliated, officers, directors and employees world-wide may, from time to time, have long or
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