- 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