SSI Research estimates Hoa Sen's profits will increase sharply in the 2023 fiscal year.

SSI Research estimates Hoa Sen's profits will increase sharply in the 2023-2024 fiscal year.

Hoa Sen Group Joint Stock Company (HSG - HoSE) is projected to record a profit of VND 775 billion in the 2023-2024 fiscal year, a significant increase compared to the same period last year.

SSI Research forecasts that in the 2023-2024 fiscal year, Hoa Sen Group will record a profit of VND 775 billion, a 24.8-fold increase compared to the same period last year. Specifically, sales volume is expected to increase by 14.6% year-on-year, reaching 1.6 million tons, assuming export and domestic volumes are projected to increase by 16% to 891,000 tons and 13% to 711,000 tons, respectively.

Explaining the growth forecast, the analysis unit stated that it was due to expectations of demand from developed markets stemming from previously signed export contracts, amidst a widening price differential between HRC in the US and Europe and Vietnam in the final months of 2023.

Reportedly, in the 2022-2023 fiscal year (from October 1, 2022 to September 30, 2023), Hoa Sen Group recorded revenue of VND 31,650.7 billion, a decrease of 36.3% compared to the same period, and after-tax profit of VND 30.06 billion, a decrease of 88% compared to the same period. The gross profit margin decreased from 9.9% to only 9.7%.

Hoa Sen increased its debt as it increased its inventory holdings in the first quarter of the 2023-2024 fiscal year.

In terms of business performance, in the first quarter of the 2023-2024 fiscal year (October 1st - December 31st, 2023), Hoa Sen Group recorded revenue of VND 9,073.22 billion, an increase of 14.6% compared to the same period last year. Net profit after tax reached VND 103.36 billion, compared to a loss of VND 680.23 billion in the same period last year, an increase of VND 783.59 billion. Furthermore, the gross profit margin improved from 2% to 10.5%.

During the period, gross profit increased by 493.7% year-on-year, equivalent to an increase of VND 789.72 billion, reaching VND 949.69 billion; financial revenue increased by 36.5%, equivalent to an increase of VND 11.71 billion, reaching VND 43.76 billion; financial expenses decreased by 56.4%, equivalent to a decrease of VND 64.05 billion, to VND 49.55 billion; selling and administrative expenses increased by 9.3%, equivalent to an increase of VND 71.3 billion, reaching VND 839.26 billion; and other activities showed negligible changes.

Thus, in the very first quarter of the 2023-2024 fiscal year, Hoa Sen Group recorded a return to profitability, mainly due to positive revenue growth, and a significant improvement in gross profit margin, leading to strong profit growth.

Contrary to the improving profit picture, in the first quarter of the 2023-2024 fiscal year, Hoa Sen Group recorded a negative operating cash flow of VND 672.9 billion compared to a positive VND 1,853.8 billion in the same period last year. In addition, investment cash flow recorded a positive VND 13.5 billion and financing cash flow a positive VND 1,748.1 billion, mainly due to increased borrowing to offset the cash flow deficit.

In terms of asset size, as of December 31, 2023, Hoa Sen Group's total assets increased by 8.3% compared to the beginning of the period, equivalent to an increase of VND 1,433.1 billion, reaching VND 18,798.4 billion. Of this, inventory accounted for VND 8,025.3 billion, representing 42.7% of total assets; fixed assets accounted for VND 4,763.8 billion, representing 25.3% of total assets; short-term receivables accounted for VND 2,415.1 billion, representing 12.9% of total assets; and cash and short-term financial investments accounted for VND 1,709.7 billion, representing 9.1% of total assets…

During the period, inventory increased by 5.2% compared to the beginning of the period, equivalent to an increase of VND 396.7 billion, reaching VND 8,025.3 billion; cash and short-term financial investments increased by 174.4% compared to the beginning of the period, equivalent to an increase of VND 1,086.6 billion, reaching VND 1,709.7 billion…

Regarding capital sources, at the end of the first quarter of the 2023-2024 fiscal year, Hoa Sen Group's total short-term debt increased by 59.5% compared to the beginning of the period, equivalent to an increase of VND 1,748.1 billion, reaching VND 4,684.4 billion and accounting for 24.9% of total capital (at the beginning of the period it was recorded at VND 2,936.3 billion and accounted for 16.9% of total capital).

Hoa Sen plans to IPO its subsidiary.

Another noteworthy point is that Hoa Sen Group has just published its Annual Report for the 2022-2023 fiscal year. Although it did not disclose its financial plan for the new fiscal year, the company did share its development strategy.

Specifically regarding investment plans, for the 2023-2024 fiscal year, Hoa Sen Group stated that, for the plastics manufacturing and trading segment, the company will continue to consolidate and improve the operational efficiency of Hoa Sen Plastics Joint Stock Company, and gradually implement an initial public offering (IPO) when sufficient resources and market conditions permit, expected to take place between 2024 and 2026.

As of September 30, 2023, Hoa Sen Group owned 99.95% of the capital in Hoa Sen Plastic Joint Stock Company, a company operating in the production and trading of plastic building materials.

Regarding the building materials and interior design distribution business segment, the Company continues to strengthen and improve the business efficiency of the Hoa Sen Home system, preparing sufficient resources to establish Hoa Sen Building Materials and Interior Design Distribution Joint Stock Company, and simultaneously planning to transfer the building materials and interior design distribution segment to Hoa Sen Home Joint Stock Company at a suitable time, expected between 2024 and 2026.

Reportedly, after two years since its establishment, the Hoa Sen Home chain now has 114 stores across the three regions of the country.

Source