Posted on 28 Aug 2024
CSC Steel Holdings Bhd (KL:CSCSTEL) outlook remains uncertain amid challenging market conditions, TA Securities said on Monday and downgraded the stock to ‘sell’ following sharply weaker-than-expected results.
The prolonged slump in China’s real estate sector, lower infrastructure spending, and heightened trade tensions have depressed global steel prices, TA Securities said in a note. Rising competition from low-cost imports, particularly from Vietnam, has also further pressured domestic prices, the house noted.
“Considering the negative risk-reward profile, we downgraded the stock to ‘sell’,” said TA Securities, the sole research house covering CSS Steel.
Shares of CSC Steel fell 3.2% on Monday to RM1.22, its lowest since August 6. At its last price, the company has a market capitalisation of RM464 million. Trading volume totaled 67,000 shares so far. The stock has declined in recent weeks ahead of the results announcement last Friday and down over 18% from its peak this year on May 24 amid recent decline in steel prices globally.
Hot-rolled coil steel, for instance, has declined some 40% so far this year amid concerns over demand. Domestically, average selling prices (ASPs) for CSC Steel were subdued in the first half ended June 30, 2024 (1HFY2024), partly due to expiration of anti-dumping duties in Malaysia, which had pressured overall steel prices.
CSC Steel's core net profit of RM16 million for 1HFY2024, a 59% year-on-year decline, accounted for only 31% of TA Securities' full-year estimate, while revenue was also relatively flat.
The house slashed its earnings forecast for CSC Steel by as much as 41% for FY2024 to RM30.9 million to reflect lower utilisation rates and ASPs.
In the longer term, “we remain cautiously optimistic about potential improvements”, TA Securities said, citing review of anti-dumping legislation and the potential amendment to be presented in Parliament by January 2025.
Further, rollouts of more large-scale infrastructure projects starting next year should alleviate ASP pressure and improve sales volume in the steel industry, the house said.
“Demand for steel products is also expected to remain resilient due to the revitalisation of the domestic property sector, driven by new housing project launches and increased construction activities,” it added.
Source:The Edge
