Analyst Pin-board SMC update – Large investments in processing coil segment
SMC’s performance in 4Q2020 will be positive as hot-rolled coil (HRC) prices increased strongly by 18% QoQ in 4Q and its stable selling volume. We expect gross margin to reach 4.8%, and NPAT was roughly 75 billion in 4Q 2020. Due to the increasing demand for processed coils from machinery producers, SMC has a bright prospect in the next years. New factories in 2021 will help SMC increase its capacity in coil processing and allows the company to growth in the 2022-2023 period. However, SMC can grow at a low pace in 2021 as its factories are running at a high utilization rate. We think the good performance in 2020 has been priced in the stock price, which surged by roughly 100% in 2020. We are NEUTRAL on this stock as steel price can be corrected in the next year after surging in 2020, which will affect negatively to SMC’s gross margin.
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