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Vietnam Securities (Vietcap Securities) pointed out in its latest analysis report that the rail and structural steel project launched by Hoa Phat Group (HoSE: HPG) on August 19 is expected to generate an annual pre-tax profit of VND773 billion (approximately US$29.4 million), with a pre-tax profit margin of nearly 7%.
The brokerage firm stated in a recent analysis that the project will supply steel for key national infrastructure projects, NM500 steel including the North-South High-Speed Railway, the Haiphong-Hanoi-Lao Cai Railway, and urban rail transit systems in Hanoi and Ho Chi Minh City.
Vietnam Securities estimates the project will take 20 months to complete, with production expected to begin in the second quarter of 2027.
According to Hoa Phat Group's plan, the project will have an annual production capacity of 700,000 tons, with a total investment of VND14 trillion (about US$532.33 million), of which VND10 trillion in infrastructure investment has been approved by local governments, NM500 steel and the remaining VND4 trillion will be used as working capital.
According to the 2025 version of the Corporate Income Tax Law, Vietnam Securities believes this project will enjoy a preferential corporate income tax rate of 17% for the first 10 years, followed by a return to the standard rate of 20% for the next 40 years. Over the 50-year project lifespan, the weighted average corporate income tax rate will be approximately 19.4%.
Favorable Internal and External Factors
Vietnam Securities believes that Hoa Phat Group benefits from multiple favorable domestic and international conditions and has positive future growth prospects.
Domestically, infrastructure demand remains strong, driven by Hoa Phat's expansion of its Dung Jut Phase II full-process steel base in Quang Ngai Province, central Vietnam, and robust public investment disbursements.
In the first seven months of 2025, public investment spending increased by approximately 70% year-on-year, achieving 44.4% of the full-year target. In July alone, investment disbursements doubled year-on-year, accounting for 63% of the second-quarter total.
Furthermore, Vietnam's domestic hot-rolled coil (HRC) market still faces a supply gap, and anti-dumping duties have somewhat mitigated the impact of Chinese imports on local producers.
Globally, as China introduces new policies to curb involution and oversupply, steel prices in the Chinese market are gradually recovering, potentially improving Hoa Phat Group's profit margins. NM500 steel Furthermore, iron ore supply is expected to steadily increase from 2026 to 2027, helping to lower steel mills' production costs.
Although the Chinese steel market may experience short-term volatility due to the real estate downturn and slow progress in capacity reduction, Vietnamese securities firms remain optimistic about its long-term development momentum.
They believe that China's entry into a new steel price cycle will push up Vietnamese steel prices, significantly benefiting Hoa Phat, which previously operated at a low cost, and expanding its profit margins.
Thus, Vietnam Securities maintains its "buy" rating on Hoa Phat's stock and raises its target price from 31,700 VND per share to 35,300 VND (approximately US$1.34). Due to Hoa Phat Group's demonstrated strong growth investment value, the company is expected to achieve a 32% compound annual growth rate (CAGR) in profits from 2024 to 2027.
Hoa Phat (HPG) closed at 26,000 VND (about $1) on the Ho Chi Minh Stock Exchange (HoSE) last Friday.
In the second quarter of 2025, Hoa Phat achieved revenue of 36.29 trillion VND (US$1.38 billion), a 9% year-on-year decrease. However, benefiting from lower production costs, Hoa Phat's net profit increased 28% to 4.27 trillion VND (US$162.7 million), its highest quarterly profit since the third quarter of 2022.
In the first half of the year, Hoa Phat's revenue totaled Rp 74 trillion (US$2.82 billion) and its net profit reached Rp 7.6 trillion (US$290 million), up 5% and 23% year-on-year, respectively. This means Hoa Phat has achieved 43% of its full-year revenue target and 51% of its full-year profit target.
