Steel producers expected to recover in Q4

Wednesday, Dec 22, 2021 09:00

Hot rolled coils stored in a warehouse of Hoa Phat Group. — VNA/VNS Photo

The market's attention is now turning to steel stocks after they corrected strongly from recent peaks.

However, in strategy reports for December, many securities companies expressed optimism about the sector, as the price level has dropped enough and the business index continues to grow in the fourth quarter of 2021.

Since mid-October, steel stock prices have fallen steeply, with Hoa Phat Group (HPG) plunging about 19.5 per cent and Nam Kim Steel JSC (NKG) dropping 31.6 per cent.

A monthly report from the Viet Nam Steel Association (VSA) showed that finished steel output in November rose 9 per cent year on year to 2.9 million tonnes.

For the first 11 months of the year, finished steel output reached 30.5 million tonnes, up 21 per cent over the same period last year, of which, hot rolled coil output alone rose 68.2 per cent.

Steel consumption decreased 13.6 per cent over last year in November to 2.3 million tonnes. But as of the end of November, steel consumption rose 18 per cent to 26.9 million tonnes. Of which, steel exports of VSA members reached 7.1 million tonnes, up significantly compared to the same period in 2020.

According to VSA, the gains in production and consumption of steel products during the period were due to good business results in the first months of 2021.

Exports were still the driving force behind the success of the steel industry. With the capacity reduction of the blast furnaces in Japan and China, the value of steel exports stayed above US$1 billion for the fourth consecutive month.

The prospect of public investment helped support the industry as gradually loosening social distancing measures accelerated public investment projects in October and November.

Specifically, investment capital from the state budget was estimated at VND41.7 trillion, up 18.6 per cent from the previous month in October, and VND48.5 trillion in November, up 14.7 per cent. In the first 11 months of 2021, investment capital from the state budget will reach VND367.7 trillion, equaling 73.8 per cent of the year's plan.

Mirae Asset Securities believes that public investment will become the engine of economic recovery in 2021 and following years, as other economic growth drivers were negatively impacted by the fourth outbreak of COVID-19 and need more time to recover.

Of which, the securities firm said that Hoa Phat Group (HPG) was expected to post record profit after tax in 2021, equivalent to over VND36.7 trillion, up 172 per cent over the same period last year. The company’s projected gross profit margin and profit after tax in 2021 would reach 26.8 per cent and 20.6 per cent, respectively, both increasing strongly compared to 2020.

Meanwhile, Mirae Asset said that from October, work resumed at Nam Kim Steel’s factories, so the output in the fourth quarter would recover strongly, especially in the domestic market. Mirae Asset forecasts that the company's output of galvanised sheet and steel pipe in 2021 would, respectively, reach 995,400 tonnes, up 70 per cent and 184,306 tonnes, up 30 per cent over last year.

Therefore, the steel producer’s revenue for the year was expected to rise 141 per cent to nearly VND28 trillion, and its net profit for the whole year would reach a record of over VND2.5 trillion, up 759 per cent.

Similarly, SSI Research also emphasised that these two enterprises’ growth prospects outperformed the general market thanks to commodity prices or strong export activities.

SSI Research forecast Hoa Phat’s business index would continue to grow compared to last year. Specifically, its fourth quarter profit might more than double thanks to the growth of both steel output and price.

Although steel prices are decreasing according to the global trend, it is still about 40-60 per cent higher than the same period last year due to pent-up demand and pre-signed price contracts. Iron ore prices as well as steel prices in China tend to recover from the bottom, which is also a factor supporting the domestic steel price level. — VNS

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