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Offline MZ

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Steel Sector
« Reply #-1 on: August 09, 2017, 09:24:12 PM »
All about steel sector.

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Steel Sector
« Reply #-1 on: August 09, 2017, 09:24:12 PM »

Offline MZ

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Re: Steel Sector
« on: August 09, 2017, 09:24:38 PM »
Industry Report (Detailed)

Pakistan Flat Steel Sector

Booming on Spending Revolution
·         We initiate coverage on Pakistan Flat Steels with an Overweight stance. Flat steel manufacturers are expected to do particularly well with expansions planned to cater booming domestic demand arising from robust growth outlook for downstream sectors including autos, electronics and construction.

·         Anti-dumping duties levied on Chinese flat steel imports have turned the tables in favor of domestic manufacturers, providing a sigh of relief against the threat of cheaper dumped imports.

·         We expect Flat Steel Stocks to offer an average upside of ~38% backed by robust earnings growth (3-year / 5-year forward CAGR of 34% / 24%).

·         With our Jun-18 PT’s of PKR178/share for ISL and PKR30/share for ASL, the stocks offer total return of 38% and 36%, respectively.

Demand Boom Likely to Sustain Momentum: Domestic demand for flat steel products has been growing at a robust pace (>10% p.a.) led by strong growth witnessed in downstream sectors including autos, electronics and construction. These sectors have seen particular surge in demand led by rising real income, increase in consumerism and ever-growing government spending to address infrastructure shortfall. As such, Pakistan’s crude steel consumption per capita remains relatively low at 37.5kg compared with global average of 224.4kg, with impressive growth rate (3-year historical CAGR of 21%) in recent years expected to sustain at least in the medium term. As such, we expect future flat steel demand to grow at a rate of 10% p.a.

Local Expansions to Replace Imports’ Market Share: In the backdrop of booming domestic demand and significant gap present in domestic demand/production, flat steel manufacturers have announced expansions in both CRC (450k tpa / 480k tpa by ISL / ASL) and GC (250k tpa by ASL) to expand their market share. In this regard, we expect CRC / GC market share to increase from 51% / 48% in FY16 to 73% / 79% by FY20 when the planned expansions start commercial operations.

Anti-Dumping Duties to Provide Meaningful Protection: The flat steel manufacturers are expected to significantly benefit from recently imposed anti-dumping duties levied on Chinese flat steel products. In this regard, Competition Commission of Pakistan (CCP) has imposed anti-dumping duties of 13.17%-19.04% and 6.09%-40.47% on imports of CRC and GC from China/Ukraine, respectively. As a result, realized spreads of CRC-HRC / GC- HRC jumped from USD92 / USD176 per ton in FY16 to estimated USD163 / USD211 per ton in FY17. Going forward, we expect realized CRC-HRC / GC-HRC spreads to stay firm at USD150 / USD230 per ton owing to increased cost of CRC and GC imports post the levy of anti-dumping duties. In this backdrop, flat steel manufacturers would be relatively resilient to falling international prices of CRC and GC whereas any decline in global HRC prices will help local manufacturers realize higher primary margins.

Valuation: Driven by a strong pickup in private consumption, flat steel stocks have rallied 223% since Jun-16, however they still remain undervalued in our view. We opine that relatively premium PE multiples of 12.9x / 9.1x for FY18F / FY19F are justified on the back of 1) expectation of 3-year / 5-year forward earnings CAGR of 34% / 24%, and 2) anticipated stability of spreads owing to protection provided by anti-dumping duties. Our Jun-18 PT’s of PKR178/share for ISL and PKR30/share for ASL imply a total return of 38% and 36%, respectively.

Offline onlybulls

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Re: Steel Sector
« Reply #1 on: August 09, 2017, 10:24:03 PM »
Is report me asl tp k sath kanjosi se kam lia gya ha. Pkr 30 is nothing.

Offline Stock_Cheeta

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Re: Steel Sector
« Reply #2 on: August 09, 2017, 10:39:36 PM »
Is report me asl tp k sath kanjosi se kam lia gya ha. Pkr 30 is nothing.
Ap kis behalf p bol rahe hn ASL 30 is nothing?

Offline onlybulls

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Re: Steel Sector
« Reply #3 on: August 09, 2017, 11:21:16 PM »
Is report me asl tp k sath kanjosi se kam lia gya ha. Pkr 30 is nothing.
Ap kis behalf p bol rahe hn ASL 30 is nothing?
Expansion kay behalf pe.
Koi shak  ;) .

Offline SlowTyperr

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Re: Steel Sector
« Reply #4 on: August 09, 2017, 11:50:09 PM »
In 10 months ASL will grow only by Rs. 9 per share?

Offline myfahim

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Re: Steel Sector
« Reply #5 on: August 10, 2017, 10:35:35 AM »
In 10 months ASL will grow only by Rs. 9 per share?

more than 40%

Offline Farzooq

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Re: Steel Sector
« Reply #6 on: October 23, 2017, 10:06:50 AM »
19% anti dumping duty on steel bars
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Offline Irfy

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Re: Steel Sector
« Reply #7 on: October 23, 2017, 10:25:12 AM »
Where INIL stands in this scenario?

Offline Farzooq

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Re: Steel Sector
« Reply #8 on: October 23, 2017, 10:33:45 AM »
Anti-dumping Duty of 19.15% Levied on Chinese Imported Re-bars
 
·         National Tariff Commission (NTC) announced final determination of 19.15% anti-dumping duty on imports originating from China for a period of 5 years effective from 23rd October, 2017 after it concluded material injury caused to domestic industry by dumped Chinese re-bars imports.

·         Note that this duty is over and above existing 30% regulatory duty in place. Based on latest Chinese re-bars prices of USD590/ton, the landed prices come out to ~PKR122,500/PKR110,000 with/without anti-dumpng duty.

·         We do not expect local re-bars prices (PKR87,000/ton) to jump immediately in the wake of this decision as the domestic manufacturers focus on maintaining target margins and remain competitive.

·         However, this is positive for local industry as it reduces the risk of heightened re-bars imports seen in 2016. Besides, local manufacturers would be much more comfortable in passing on rising raw material costs.

·         The key beneficiaries from listed space are Amreli Steel (ASTL), Mughal Iron and Steel (MUGHAL), Ittefaq Iron Industries (ITTEFAQ) and Dost Steels Limited (DSL).

·         Our top pick amongst these is ASTL (Jun-18 TP: PKR156) for which we have assumed gross margins of 17.6%/19.5% for FY18E/FY19E. The latest imposition of duty poses upside risk to our estimates, however we await actual increase in domestic retail prices before changing our assumptions.

Elixir
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