return icon Vietnamnet.vn

Construction material stocks expected to benefit from public investment projects in 2022

News about the commencement of 12 projects along the North-South expressway in 2022 is considered to be the main driving force for the construction materials group, including steel, stone and asphalt.

{keywords}
Hot rolled coils stored in a warehouse of Hoa Phat Group. Photo hoaphat.com.vn

At a recent conference, Deputy Prime Minister Le Van Thanh asked the Ministry of Transport to find solutions to renew investment procedures and arrange human resources to develop plans and complete procedures for beginning 12 expressway projects in 2022, creating a premise for completing projects in 2025.

In the recent report on prospects for 2022, VNDirect Securities Corporation also sees public investment as the main driver for the construction materials industry.

The company believes that the disbursement of public investment capital in 2022 will increase by 15-25 per cent compared to the actual disbursement in 2021, as the bottleneck of a lack of construction stone and backfill has been resolved after the Government granted mining licences to new mines. 

Besides, prices of construction materials such as iron and steel, cement and construction stone are expected to decrease in 2022, which will create favourable conditions for public investment. As commodity prices surged in 2021, the actual disbursement of public investment capital was at a low level, only 85-95 per cent of the whole year's plan.

Meanwhile, many key transport infrastructure projects have completed preparations and site clearance, with main work to begin in 2022. This will increase demand for construction materials, improving revenue and profits of enterprises in the industry.

In the report, VNDirect said that asphalt businesses will enter a strong growth cycle, and the 2022-23 period will be a profitable time for the group, because asphalt laying usually takes place in the later phase of road construction projects.

For example, data from Petrolimex showed that its asphalt revenue skyrocketed in the 2014-15 period, when public investment capital in transport infrastructure rose sharply. By 2016-19, as spending on infrastructure cooled down, the company’s revenue in this segment decreased by about 50 per cent compared to the previous period. 

With about 30 per cent of the domestic asphalt market share during 2015-2020, Petrolimex is likely to win contracts thanks to its large warehouses, wide distribution system and long-term relationships with State-owned enterprises, the securities firm said, adding that Petrolimex also regularly fulfils contracts.

For the construction stone industry, due to the characteristics of the industry, transportation costs often account for a large proportion of the finished product's expense. Depending on the distance and type of transportation, prices of stone delivered to the site can be twice as high as the price of stone at the quarry.

Therefore, VNDirect believes that listed companies owning quarries located near expressway projects will be prioritised for mobilisation thanks to their advantages and product quality.

It is estimated that major infrastructure projects in the south, including the My Thuan-Can Tho and Phan Thiet-Dau Giay expressways, will require 30-32 million cubic metres of construction stone in the 2020-25 period, equivalent to 150-160 per cent of licensed mining capacity of listed companies in the industry. 

Accordingly, businesses that own high-quality quarries with favourable locations will be the main source of supply, especially Tan Cang and Thien Tan quarries owned by four companies including Binh Duong Mineral and Construction JSC (KSB), Bien Hoa Building Materials Production and Construction JSC (VLB), Hoa An JSC (DHA) and Dong Nai Materials & Building Investment JSC (DND).

The key project will be a strong driving force in the profits of construction stone businesses in 2022-23. 

Positive outlook for steel industry

VNDirect also sees a bright prospects in 2022 for the steel industry, which has attracted a lot of attention recently. 

Boosting infrastructure development and the warming of the residential real estate market will help the country’s construction steel consumption increase by 10-15 per cent next year. Similarly, local coated steel consumption will also inch up slightly by 5 per cent in 2022 from strong growth of 39 per cent this year.

In addition, the export outlook is also positive as the global steel demand will increase significantly, thereby stimulating Vietnamese steel manufacturers to boost exports to major markets.

VNDirect forecasts that Vietnamese construction steel price will reach VND15,500 a kilo (US$0.68 a kilo) in 2021, up 38 per cent over last year, before falling 8 per cent and 5 per cent in 2022 and 2023, respectively, to VND14,300-13,600 a kilo.

The securities firm expects that Hoa Phat Group (HPG) will record compounded growth of 12 per cent and 9 per cent, respectively, in revenue and net profit in 2022-25 thanks to strong construction demand. 

However, risks remain if domestic construction material prices rise too high, the Government may implement tariffs to cool down prices. Moreover, higher than expected input material prices will also reduce the industry's gross profit margin.

Source: Vietnam News

Construction materials at risk of oversupply

Construction materials at risk of oversupply

After a period of rapid development, some construction material products are facing the risk of oversupply.

Top 10 best-performing stocks in Vietnamese market 2021

Top 10 best-performing stocks in Vietnamese market 2021

As of December 30, five out of the best growth stocks in Vietnam have seen increases of more than 1,000 percent in value, with one even reaching an over 2,000 percent rise.

MORE NEWS

Vietnam among world's worst performing stock markets in first half

In the first half of 2022, both market's benchmark index and liquidity plunged sharply, with the VN-Index posting a dip of over 20 per cent, making it one of the world's worst-performing stock markets.

Vietnam, Thailand to soon resume commercial flights

Vietnam and Thailand should soon restore commercial flights and open new routes to facilitate tourism and trade cooperation between the two countries.

VIETNAM BUSINESS NEWS JULY 4

Vietsovpetro launches two support sets of Dragon oilfield

New milestone in Vietnam’s relations with Hungary, UK

The five-day visits of Vietnam’s National Assembly Chairman Vuong Dinh Hue to Hungary and the UK marked a new milestone in bilateral relations, eventually contributing to the Vietnam-EU partnership.

Vietnam remains among major global production facilities

The nation continues to be "named" in the list of major global production facilities, with six-month export turnover reaching US$185.94 billion, marking a year-on-year rise of 17.3% and a trade surplus of more than US$ 700 million.

Steering committee established to boost economic recovery effort

The Government has established a steering committee for the deployment of the country’s economic recovery and development program, led by Deputy Prime Minister Le Minh Khai.

Entertainment and cultural events of the week (July 4-10)

Upcoming entertainment and cultural events in Vietnam's major cities on July 4-10/2022.

Kim Duyen wins Supra Model Asia at Miss Supranational 2022

Kim Duyen - Vietnamese representative at Miss Supranational 2022 - qualified in the top 11 Supra Chat and was awarded the title of Supra Model Asia of Miss Supranational 2022.

VN Trade Promotion Department lauds ASEAN export opportunites

Vietnamese businesses have many opportunities to increase export goods to Thailand, Laos and Cambodia, according to the Trade Promotion Department of the Ministry of Industry and Trade.

New policy boosts insurance market's long-term development

The newly-issued Law on Insurance Business is expected to positively impact the insurance market's long-term development.

Rules on business in prize electronic games for foreigners

The Ministry of Finance has issued a circular guiding the implementation of some articles of the Government’s Decree No. 121/2021/ND-CP on business in prize electronic games for foreigners in Vietnam.

Vietnam wins 13 awards at “Two country circuit” photo contest

Vietnamese photographers have won 13 medals and certificates of honour in travel, portrait and free categories at the 7th “Two Country Circuit” photo contest 2022.

True Italian Taste 2022 promotes Italian cuisine in VN

True Italian Taste 2022, a project aiming to promote authentic Italian cuisine to the world, has kicked off in Vietnam.

Who will work when so many public-sector staff have been disciplined?

“No need to worry that the country won’t have cadres to work," said Party Secretary General Nguyen Phu Trong.

Labour export to South Korea temporarily halted for eight localities

The Ministry of Labour, Invalids and Social Affairs (MoLISA) has announced that the labour migration programme with South Korea will be temporarily suspended for eight districts, towns and cities.
back_to_top