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HSG - Margin contraction and interest expense wipe out top-line growth - Earnings Flash

HSG published Q3 FY17 results. Revenue grew 57% vs Q3 FY16 to VND7.2 trillion (USD318.5 million) while NPAT-MI dropped 39% to VND272 billion (USD12.0 million). The discrepancy between top and bottom lines was caused by a shrinking gross margin and a surge in interest expenses. As Q3 margins came in weaker than our expectation leading to HSG’s 9M FY17 bottom line of VND1.1 trillion (USD50 million) to trail our forecasts, we will consider lowering our forecast and target price for HSG.