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DBS: Angang warns interim earnings decline (-ve)

Posted on July 18, 2022July 18, 2022 By alanyeo No Comments on DBS: Angang warns interim earnings decline (-ve)
  • Angang (347 HK) has issued profit warning worse than expectation.
  • Expect 1H22 earnings drop of 67% y-o-y to RMB1.7bn, representing a 78% y-o-y decline during 2Q, amid steel GP decline due to lower steel ASP and rising production cost.
  • In anticipation of continual GP pressure and high base last year, 3Q earnings decline expected to remain substantial.
  • Maintain SELL on Angang

What’s New

  • Angang (347 HK) has issued interim profit warning worse than expectation.
  • Six-month earnings had dropped 67% y-o-y to only RMB1.7bn, representing a 78% y-o-y decline during 2Q.
  • The decline was primarily due to Chinese steel product average prices drop of 10% y-o-y in 2Q, compared to a 7% increase in the first quarter.
  • The significant increase in major raw materials cost during the period also attributed to the earnings decline. 

Our View:

  • Since July, Chinese steel product prices downtrend continue to be sharper than production cost decline. 
  • In anticipation of Chinese steel products’ GP pressure to remain, we expect steel companies earnings would continue to decline in 3Q, especially given high base last year.
  • Pegged to the lower-end of the historical valuation range, our TP is HK$2.7. Maintain SELL 

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Research - Equities Tags:Angang Steel

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