Initiate coverage with BUY rating with target price of VND65,700
The world has gradually recovered since the COVID-19 pandemic last year, which has caused a drastic increase in steel prices recently. The latest announcement to cut emissions from BOF steel mills in Tangshan has added fuel to fire and elevated steel prices even more. Based on the DCF valuation method, we initiate coverage Hoa Phat Group with a BUY rating and the target price of VND65,700 due to the huge and stable cash flow. Currently, HPG is trading at 7.5x of 2021F PER, which is slightly higher than its 3-year average. Overall, HPG is believed to gain higher profit margins thanks to higher steel prices and the additional volume of HRC from 2021.
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