18/09/2019 17:27

{I-bank focus}HSBC lowers Maanshan Iron (00323) to HK$3.26

[ET Net News Agency, 18 September 2019] HSBC Global Research lowered its target price
for Maanshan Iron & Steel (00323) to HK$3.26 from HK$4.5 to reflect its lower ROE (return
on equity) estimates.
The research house also downgraded its rating to "hold from "buy", given an unexciting
steel price outlook, and Maanshan's product exposure to the property sector, which is
showing signs of slowing.
HSBC said raw material price strength, especially for iron ore, has been the main reason
for margin declines for steelmakers so far in 2019. Iron ore peaked at US$125/t in June
and has averaged US$95.3/t for 2019, up 37%. While the price has eased from this peak, it
is still hovering around US$90/t, considerably higher on a year-on-year (YoY) basis.
The steel price has held up well in 2019 so far although it has been much weaker than
prices of raw materials. Rebar and HRC prices are flat year-to-date but down 16% YoY and
14% YoY, respectively. This has resulted in significant margin squeezes for steel
HSBC cut its 2019-20 net profit estimates for Maanshan by 26.3% and 1.7% and to
RMB3,211mn and RMB4,407mn. (KL)

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