Analyst Research Report Snapshot

Title:

China Steel (2002 TT, NT$25.55, N): Downgrade to Neutral

Price:

$69.00

Provider:

KGI Greater China

Date:

22 Apr 2014

Pages:

7

Type:

AcrobatPDF

Companies referenced:

2002.TW

Available for Immediate Download
Summary:

Oversupply weighs on prices China Steel posted preliminary 1Q14 sales of NT$92.4bn, operating profit of NT$4.73bn, and pretax income of NT$5.07bn; we estimate EPS of NT$0.23; despite shipments of 2.37mn mt vs. our estimate of 2.25mn mt, operating profit missed by 6.5% due to higher cost associated with No.4 furnace annual maintenance; net income beat by 1.6% on cash dividend from overseas investment While major Chinese steelmakers raised daily output by 5% in early April in response to street expectation for peak seasonality, industry-wide oversupply persisted with low-end sentiment to build inventory; company quotes flattish in June and up a minimal 0.37% in 2Q14 vs. our forecast of 4.8%; 2Q14 earnings will disappoint Given ineffective elimination of outmoded capacity in China, overcapacity will likely weigh on steel prices and the company’s bottom line despite an industry recovery; we cut our 12M target price from NT$30 to NT$25.5 (1.3x our end-2014F BVPS) on dim outlook for 2014-15; downgrade to Neutral Shares are trading at 1.3x our end-2014F BVPS, slightly lower than the historical average of 1.5x. Despite a sector recovery, we don’t expect China’s move to eliminate outmoded capacity to take effect soon given persistent oversupply of crude steel. Considering upcoming slow seasonality in 3Q14, we downgrade this counter to Neutral with a 12M target price of NT$25.5 (NT$30 previously), or 1.3x our end-2014F BVPS.

Why buy analyst research?

  • Institutional quality research
  • Available for Immediate Download
  • Detailed company or industry insight
  • Print or save
  • 24 hour customer support
Return to previous page without adding this item to your cart.
Email Customer Support.

About Analyst Research

Analyst research reports are available for immediate download after purchase. You will have unlimited access to the report for 24 hours after purchase, to download, print or save it as many times as you wish. Analyst Research provided by Reuters does not constitute investment advice, and is not endorsed by Reuters Research. This information is protected by copyright and intellectual property laws. More information on Analyst Research.