Steel

Steel

Positive signals from increased steel price and growing domestic demand
The steel price in the global market has increased continuously since late-
2012 due to China’s economic recovery (GDP announced higher than
expected and the increased industrial production figures). For Thai steel
price, it has increased more slowly due to cheap steel imported from
China. However, the government sector has given a hand by collecting AD
tax at 14.28-19.47% from China’s boron-added steel since last December,
as other measures might be launched in the future. Accordingly, the
domestic steel price would be boosted this year. In terms of Thai steel
industry in 2013, the demand is projected to increase not less than 5%
YoY to 17.6 million tons as a result of the government sector’s march
toward public utility system development and constantly increasing car
production.

Already survives record low, many companies’ profit to return in 2013
The financial results of Thai steel companies should have already survived
the record low in 2012. Although the big steel company like SSI might face
net loss once again in 2013, it is projected to decrease significantly
(compared with 2012) due to the pressure toward the company that has
eased substantially after capital raising, extension of debt payment due
date, the smelting plant in the UK that it is projected to reach the breakeven
point this 3Q13. In terms of TSTH and BSBM, their profit is projected
to return once again this year after suffering loss in 2012. For TMT and
SMIT (downstream industries), their profit tends to improve along with the
growth of those industries relevant to steel such as construction and
automotive industries. In addition, MCS’s obvious recovery of earnings
result is projected to be seen due to pre-orders that have increased until
mid-2014.

Upgrade to “Neutral”, choosing MCS and SMIT as top picks
According to severe loss in 2012, the return of most steel stocks has
underperformed the market. Nevertheless, steel stocks are likely to bring
about satisfying return this year due to THB appreciation which benefits
steel companies’ import of raw materials and the government sector’s
policy to prevent Chinese steel from taking up the market. Accordingly, we
upgrade our recommendation for the steel sector from “Underweight” to
“Neutral”, choosing MCS ([email protected]) and SMIT ([email protected]) as top picks of
the steel sector.