POSCO Keeps Neutral Rec - Analyst Blog
19 Settembre 2011 - 8:12PM
Zacks
We currently
maintain a Neutral recommendation on South Korean steelmaker
POSCO
(PKX), the world’s third largest
steelmaker on the basis of output.
The company
primarily manufactures steel for the shipping and construction
industries and operates through its two steel production
facilities, the Pohang Works and the Gwangyang Works.
The
company’s consolidated group has a total of 202 companies with
roughly 143 companies engaged in steel, steel supports, trading and
material related works, while the non-steel companies are engaged
in E&C, Energy, ICT, and Chemical industries.
According to
the World Steel Association, global steel demand is expected to
rise by 6% in both 2011 and 2012 because of sustained growth in
demand from the emerging markets. Benefiting largely from its wide
regional diversification, self-sufficiency in raw materials and
higher proportion of value-added products, we think the company is
very well placed to make the most of the growth momentum in the
steel industry.
In the
recently reported financial results, the company posted solid
growth in both net income and revenues. Second quarter 2011 net
income surged 22.6% year over year while the top line registered a
growth of 58.0%.
However, the
positive momentum for POSCO received a setback in the near term
from a rise in the price of raw materials although in the second
quarter, and the company registered a 76.6% year-over-year increase
in its cost of goods sold. To make matters worse, competition is
increasing manifold impeding growth, especially from peers
like Arcelor
Mittal (MT) and Nippon Steel Corp. and
restricting the stock to perform in line with the
market.
The current
Zacks Consensus Estimates for fiscal years 2011 and 2012 are $11.34
and $12.65, reflecting a year-over-year decline of 7.17% and growth
of 11.56%, respectively.
Thus,
anticipating a lack of positive catalysts in the near term, we
maintain a Neutral recommendation on the stock.
ARCELOR MITTAL (MT): Free Stock Analysis Report
POSCO-ADR (PKX): Free Stock Analysis Report
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