SMC lifts profit target on steel industry's positive outlook

Saturday, Mar 27, 2021 07:21

Workers operate machinery at SMC's plant. — Photo smc.vn

Thanks to the optimistic outlook of the steel industry in the long-term on stronger demand from the recovery of the construction industry, SMC Trading Investment JSC doubled this year's profit after tax target.

On March 19, the Board of Directors of SMC approved the adjustment to increase 2021's profit after tax target to VND300 billion, an announcement published on its official website showed.

Earlier, the company made a cautious target of just VND160 billion, down 49 per cent over the result of 2020. The move suggested that SMC is optimistic about the industry outlook in 2021.

Another peer also increased its revenue and profit targets for 2021. Nam Kim Steel JSC (NKG) set a target of VND16 trillion in net revenue and VND600 billion in profit after tax, up 38 per and 103 per cent over the same period of 2019, respectively.

Right after the news, SMC shares hit the biggest daily gain to VND29,650 a share on March 22, up 52.1 per cent against the beginning of the year.

On Wednesday, SMC shares traded at VND28,500 a share, down 2.73 per cent, while NKG stayed flat to finish the day at VND21,700.

Brighter steel industry outlook

In 2020, the price of hot rolled coil (HRC) on the global market surged and even broke over US$700 a ton, pushing up the domestic price. As all of the company's main businesses need HRC, steel product prices rose dramatically in the last months of 2020.

The HRC price continued its rally since the beginning of the year on stronger demand from China. The most-active May HRC future contract on Shanghai Future Exchange was 5,130 yuan/ton (US$784.37 a ton) on Thursday.

According to a steel industry report released in mid-January by SSI Research, the driving forces of domestic steel demand include infrastructure investment and FDI inflows, which also help promote civil construction activities along with infrastructure and FDI projects.

Export demand is still positive. SSI Research estimated a single-digit growth in Viet Nam's steel exports. However, as the world supply becomes more stable, foreign sales are likely to face intense competition in export markets.

Many other securities firms expect a bright outlook for Viet Nam's steel industry.

Mirae Asset Securities (Viet Nam) Limited Liability Company (MiraeAsset) projected the country's steel production to increase by 15.7 per cent in 2021, three times higher than its expectation of world steel production.

Meanwhile, Vietcombank Securities Company Ltd (VCBS) has assessed that local steel demand will continue to grow on the recovery of real estate, as well as momentum from public investments. — VNS

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