18/09/2019 17:46

{I-bank focus}HSBC lowers Angang Steel (00347) to HK$3.63

[ET Net News Agency, 18 September 2019] HSBC Global Research lowered its target price
for Angang Steel (00347) to HK$3.63 from HK$4.92 to reflect share issuance in the ratio of
three shares for every 10 shares being held to H shareholders by way of capitalisation of
the capital reserve. The research house maintained its "hold" rating.
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 Angang by 35% and 9.2% and to RMB2,728mn
and RMB3,953mn. (KL)

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