HPG: Expectations from railway project and blast furnace operations

According to expert estimates, total steel demand for Vietnam's railway projects is projected at around 10 million tons. HPG is currently accelerating its high-quality steel casting and rolling project, having signed a contract with Primetals Technologies to supply a casting and rolling line with a capacity of 500,000 tons/year. The output includes steel for tire cords, bead wires, cold stamping, prestressed steel, etc.

According to SSI Securities, this project is expected to positively affect HPG’s Q2 2025 business results compared to Q1 2025. Additionally, with the new plant’s capacity coming online and the positive impact of anti-dumping duties on imported HRC steel from China, HPG is expected to see improved performance. Notably, Blast Furnace No. 1 at the Dung Quất 2 plant began operating in March 2025 and will contribute throughout Q2 2025.

Moreover, the HRC market has shown positive momentum, with HRC steel prices slightly increasing in April 2025 after the AD20 anti-dumping tax took effect in March 2025. In May 2025, according to SSI, construction steel prices increased by about VND 200/kg (up 1.5%) due to rising demand and limited inventory at distributors.

A recent report by VCBS Securities suggests that HPG stock will benefit from strong recovery in demand, especially in the construction steel and hot-rolled coil (HRC) segments.

The anti-dumping tax, effective from March 7, 2025, has supported HRC sales volumes. It is expected that Phase 1 of Dung Quất 2 HRC production will reach 55% capacity, while Dung Quất 12 will reach 78% efficiency in 2025. Steel demand is forecast to grow thanks to government-led public infrastructure projects, improved civil construction demand due to relaxed legal barriers, and a better business environment boosting steel consumption.

As of now, Phase 1 of the Dung Quất 2 plant is nearly operating at full design capacity, and HRC orders have been recorded since March, with deliveries scheduled through mid-year. Phase 2 is expected to be completed by October, and the second blast furnace is slated to be accelerated for operation in Q4 2025.

In addition to high-quality steel, this strategic move helps HPG diversify its product offerings and reduce reliance on construction steel, which is inherently cyclical. The rail steel manufacturing plant at Dung Quất 2 has a total investment of VND 14,000 billion. The high-quality steel plant (including rail steel) has a projected capacity of about 500,000–600,000 tons/year.

For the Phú Yên steel plant (500 hectares), HPG plans to develop a project with a design capacity of 6 million tons/year and a total investment of VND 86,000 billion. The specific steel product is still under research. If HRC is chosen, the Vietnamese market—estimated at 13 million tons in total demand—should be able to absorb the 3 million tons from Phú Yên.

Regarding HPG’s 2025 business outlook, VCBS forecasts a 28.2% increase in revenue to VND 178,041 billion, mainly driven by 30.4% growth in the steel segment. Specifically, construction steel volume is projected to rise by 9.4% due to strong public investment, HRC volume to grow by 55.4% as Dung Quất 12 reaches 78% efficiency, and steel pipes and galvanized steel are expected to grow by 13.9% and 3.4%, respectively.

Using the DCF (Discounted Cash Flow) method, VCBS projects a target price for HPG stock at VND 33,180/share. However, investors should be cautious as export volumes may fall short of expectations due to rising protectionism in export markets. Oversupply from China could heighten competition in overseas markets and exert downward price pressure. Additionally, slower-than-expected public investment disbursement could directly impact HPG’s revenue and profit, affecting the stock price.