AMRESEARCH has lowered its target price on Lion Industries Corp Bhd (4235) as it expects the company's earnings in the near term to be affected."Near-term, sequential earnings are likely to weaken - steel demand contracted during the June-July period. Plant shutdowns were carried out in stages in Johor (June), Labuan (July) and Banting (August)," the research house said in a report this week.
AmResearch, however, maintained its "Buy" recommendation on the stock.
But Lion believes its earnings outlook should improve moving into the second half of financial year 2011 - as global steel demand gathers momentum from the fourth quarter of this year. Regional steel prices should get a lift from China's capacity cutbacks. Our channel checks indicate that the Chinese government plans to phase out about 100 million tonne or circa one-sixth of China's total steel capacity by end-2010.
On the demand side, there have been tentative signs of a rebound in regional steel orders, especially from Vietnam. Prices for regional billets have increased to US$580 a tonne against US$513 a tonne (RM1,595) in June 2010. Export sales account for about 30 per cent of Lion Ind's steel products.
Lion's HBI sales should get a kick from rising scrap prices by the first half of next year amid resurgence in infrastructure activities.
No comments:
Post a Comment