DBS: Maanshan Iron & Steel Co Ltd – Sharp decline in interim earnings expected (-ve)
alanyeo
Magang (323 HK) issued interim profit warning, expecting a 68% yoy decline in 1H22 earnings to RMB1.5bn, worse than expectation.
This translates to a 93% y-o-y decline during 2Q, as GP plunged on lower steel ASP and rising production cost.
Expect Chinese steel products’ GP pressure to remain, hence steel companies earnings would continue its declining trend in 3Q from their high base last year.
We have HOLD rating for Magang.
What’s New
Magang (323 HK) has issued interim profit warning worse than expectation.
Six-month earnings had dropped 68% y-o-y to only RMB1.5bn, representing a 93% 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.
Also due to the significant increase in major raw materials cost during the period.
Our View:
Since July, Chinese steel product prices downtrend continue to be faster than production cost decline.
In anticipation of Chinese steel products’ GP pressure to remain, we believe steel companies earnings would continue its declining trend in 3Q from their high base last year.
Trading to the lower-end of the historical valuation range, we have HOLD rating for Magang.
