NKG_BUY_TP 60,400VND_Upside 18%_Motivation from export_BSC Company Update

 Valuation

• NKG is being traded at PE FW = 4.7x – relatively cheap compared to stocks in the same industry.
• BSC recommends BUY NKG with 1-year target price of 60,400 VND/share equivalent to upside 18% compared to the price on 10/03/2022 based on P/E valuation method with target PE = 5.5x .

• In 2022, BSC forecasts NKG's net profit and net profit of VND33,788 billion (+20 % YoY) and VND2,399 billion (+7.8% YoY) respectively, EPS FW = 10,985 VND/share based on the following assumptions: (i) Consumption of all kinds of steel + 25.7 % yoy, (ii) Gross profit margin -1% yoy due to HRC price -5% yoy.

• Consumption volume increased thanks to the increase in capacity of galvanized steel sheet (+30%). The export market still plays an important role in the revenue structure (80%) due to (1) the high import demand of developed countries; (2) production cost advantage in Vietnam.
• Profit margin decreased due to: (1) high competitive pressure in the export market and (2) fluctuations in input material prices.

• Steel selling price dropped more than forecast -5% yoy;
• Raw material prices fluctuated stronger than forecast.

• Total consumption of steel products in 2021 is estimated at 1.15 million tons (+64% YoY), of which galvanized steel production will reach 978 thousand tons (+74%yoy), pipe steel output will reach 173 thousand tons (+22% yoy).
• Galvanized steel sheet exports accounted for 74% of total consumption, reaching 719 thousand tons.