Analyst Pin-board SMC – Focusing on the coil processing segment
We expect SMC to exceed its NPAT target as its result in 2Q is likely to grow QoQ. HRC prices are still in an uptrend, and the demand for SMC’s products is strong. The company has accumulated a large inventory of VND 2,850 billion in 1Q (+55% QoQ) at a low price, hence, we expect its gross margin will still be as good as in 1Q. Currently, SMC is trading at a TTM P/E ratio of roughly 3.75x, which we think is low compared to other downstream steel producers. Hence, it is one of our favorite stocks in the steel industry as it is relatively undervalued, and the company still has strong growth potential in the next few years. We come up with a fair value of VND 38,900 per share. Together with a cash dividend in the next 12 months of VND 1,000/share, the total return is 32%, based on the closing price as of April 26th, 2021. Hence, we recommend BUY this stock.
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