Analyst Pin-board: NKG – 1H2020: COVID-19 harmed sales, but profitability improved
We believe NKG’s business has become more sustainable as its gross margin of 4.6% in 2Q2020 was acceptable as HRC prices dropped strongly during the COVID-19 outbreak. However, the interest expenses were still significant compared to its net income. We expect the company to balance its net margin and sales properly. Regarding 2H2020, the strong HRC prices can support NKG’s net income in 3Q2020, but there are several threats. A fresh COVID-19 outbreak could have affect Chu Lai steel pipe factory’s progress negatively, and lead to weak demand for coated steel and steel pipes in the domestic market. Meanwhile, HRC prices could decrease in late-2020 due to the weak recovery in the manufacturing segment worldwide. In the long-term, we are waiting for opportunities from the shift of factories to Vietnam
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