(HSV VIETNAM GROUP) - Securities companies evaluate the impact of the 25% tax policy from the US on the Vietnamese steel industry, how are the profit margins of Hoa Phat, Hoa Sen, Nam Kim affected?
MBS also assessed the net profit growth prospects of Hoa Phat, Hoa Sen and Nam Kim in 2025.
On February 11, the US government officially decided to impose a 25% tax on all imported aluminum and steel products to protect domestic manufacturers.
In a recent report, MB Securities (MBS) said that the above action is intended to protect domestic steel manufacturers in the context that a number of large factories in Pennsylvania have had to close in 2024.
Currently, steel imports in the US account for 51% of demand (mainly coming from HRC and CRC products serving automobile production) and the action of imposing tariffs contributes to reducing the country's dependence on imported steel.
Vietnam is in the group of 5 largest steel exporting countries to the US in 2024, alongside Canada, Brazil, Mexico and South Korea. However, Vietnam is subject to low tax rates at 22% - 36% according to section 232 of the US Trade Act from 2018. This tax rate is lower than other trading partners when tax rates are over 60%.
Securities companies evaluate the impact of the 25% tax policy from the US on the Vietnamese steel industry, how are the profit margins of Hoa Phat, Hoa Sen, and Nam Kim affected? - Photo 1.
By the end of 2024, the US will become Vietnam's third largest steel export partner with a proportion of about 13% (after Asean and EU). Export output to the US grew by 50% over the same period, reaching 1.7 million tons, of which the majority came from galvanized steel sheets, CRC and HRC accounted for a lower proportion.
MBS said that the growth in coated steel export output comes from positive signals of the country's construction market when, according to statistics from the US Department of Commerce, total investment capital in the construction market recovered by 6.5% over the same period.
Of the total steel output exported to the US in 2024, HRC & galvanized steel account for 60% and these items are subject to tax rates of 21%-36%. In particular, construction steel and HRC products are subject to a tax rate of about 33% - 36% and MBS assesses that these products may not be affected by US policies because the current tax rate is higher than 25%.
"However, some galvanized corrugated iron products have a tax rate of about 22% and increasing taxes can reduce the competitive advantage in price for Vietnamese steel, so there is a high possibility that businesses will have to reduce selling prices in the US," the analysis group said.
At the same time, in the context that US demand is dependent on exported steel (accounting for 51% of consumption), finding new exporters may take time. Besides, Vietnamese galvanized steel companies can completely reduce selling prices to maintain market share because gross profit margin is at a stable level of 8% - 10%. Thanks to that, export output can be maintained while profit margin is expected to decrease slightly.
Assess the impact on domestic businesses
According to the above analysis, MBS assesses that galvanized steel companies such as GDA, HSG and NKG will be slightly affected by the decision to impose taxes while HPG will not be negatively affected.
Securities companies evaluate the impact of the 25% tax policy from the US on the Vietnamese steel industry, how are the profit margins of Hoa Phat, Hoa Sen, and Nam Kim affected? - Photo 2.
As for HPG, MBS assesses that this business is not expected to be affected by the new tax rate because the current tax rate on exported construction steel and HRC products is above 33%.
On the other hand, galvanized steel companies such as HSG, NKG and GDA may reduce gross profit margins in the context of a high possibility of having to reduce selling prices to maintain market share in the US. For export output of galvanized steel to the US, output can remain stable thanks to reduced selling prices and finding other suppliers will take a long time.
MBS also evaluates the net profit growth prospects of Hoa Phat, Hoa Sen and Nam Kim in 2025 to grow strongly, forecasting increases of 50%, 51% and 30% respectively over the same period.
Meanwhile, revenue growth, although still reaching a double-digit increase, is somewhat more modest. MBS estimates that Hoa Phat's revenue will reach VND 172,053 billion in 2025, an increase of 24% over the same period. For Nam Kim, this securities company forecasts revenue will reach more than 24,200 billion VND, equivalent to an increase of 17%, and Hoa Sen will achieve an increase of 12% compared to 2024, recording nearly 43,900 billion VND.
Ha Diem HSV