Hpg Valuation Report

...

FCFF

2015E

2016E

2017E

2018E

2019E

Present Value of FCFF

(1.110.654)

1.543.911

2.834.267

2.835.234

2.904.074

Total Present Value

9.006.831

Present Value for Terminal Value

26.044.361

Enterprise Value

35.051.192

(+) Cash and Marketable securities

2.026.280

(-) Debt

6.747.847

Value of Shareholders' equity

30.329.625

Shares outstanding (mn shares)

733

Intrinsic Value

41.384

Unit: VND million

For the EV/EBITDA comparable approach, I estimate fair value for EV/EBITDA to be 6,79x. Summary of this approach is as follows:

Comparable Indicator

Target

Target price

EV/EBITDA

6,79x

42.940

Peers

Market cap(mn USD)

Enterprise value (mn USD)

Revenue (mn USD)

EBITDA ( mn USD)

EV/EBITDA

POSCO

12.393

45.683

61.851

6.130

7,45x

Hyundai Steel Co

5.798

17.297

15.926

2.546

6,79x

Tata Steel Ltd

3.151

18.458

24.614

2.465

7,49x

JSW Steel Ltd

3.280

10.087

8.483

1.520

6.,64x

Xiwang Special Steel Co Ltd

302

882

1.403

188

4,70x

Daehan Steel Co Ltd

233

204

992

36

5,72x

Steel Pipe Industry of Indonesia PT

57

284

284

39

7,26x

HPG

991

1.231

1.205

251

4,90x

Median

6,79x

APPENDIX

Steel Industry overview

[pic 35]

Steel industry overview

There are three main products in the Viet Nam steel industry: construction steels, steel sheets and steel pipes.In the period of 2010-2014, CARG of demand in construction steel, galvanized steels sheet and steel pipes are 1.96%, 24.5%, 16% respectively:

- Construction steels: Construction steels very popular in the construction nowadays.However, the growth rate of this product, however, is low. In terms of market shares, Hoa Phat, Pomina, TISCO, Vina Kyoei và VNSteel are top companies, which hold leading market shares in the past 5 years. In 2014, Hoa Phat has overcome Pomina to become the company, which has the largest market shares in the construction steels sector.

- Galvanized steel sheet: Galvanized steel sheet products are widely applied in reality. Besides common uses is manufaturing roofs, partitions, gutters, galvanized sheets also can be used in the household appliances, safe, mechanical equipment, machinery,...Thanks to various application of galvanized steel products, it has diverse types of customers, from the building contractor to the intermediate segment such as households and divisions. However, galvanized steels sector supply are excess as steel companies expand production continuously, while domestic consumption rose more slowly than output production. As a result, main driver of growth of this segment is export to other countries, especially Myanmar and Indonesia. These countries needs focus on products in the intermediate segment in residential construction and industrial production which Vietnam steel companies may supply at competitive prices.