NKG - Recovering domestic consumption, but weakening steel prices
NKG can seize opportunities in foreign markets to maximize profit. The company showed its flexible sales strategy in 9M2021 by reallocating production volume to the most profitable markets, such as Europe and North America. In 4Q, the gross margin is going to decrease in Europe, but will still be attractive in North America. With its flexible strategy, we expect NKG to increase its selling volume in North America and offset partially decreasing profitability in Europe. In the long-term, decarbonization in the EU and China is changing the steel industry significantly and boosting steel production costs. We expect exports will continue to support NKG’s NPAT in 4Q2021 and 2022 owing to its competitive production costs and favorable trade policies in Europe and North America. Besides, additional production capacity will allow the company to seize opportunities as sales in the domestic market can grow strongly in 2022.
Using FCFF, and PER methods, we come up with a fair value of VND 48,000 per share. Together with a cash dividend in the next 12 months of VND 1,000/share, the total return is 29%, based on the closing price as of December 13th, 2021. Hence, we recommend investors BUY this stock.
Nam Kim Steel Joint Stock Company is a Vietnam-based company operating in the steel industry. The Company is engaged in the manufacturing of hot-dip 55% zinc-aluminium alloy coated steel branded Naki Zincalum, hot-dip zinc coated steel branded Naki Zinc, pre-painted zinc coated steel and pre-painted zinc-aluminium coated steel branded Naki Color, galvanized steel pipe and black steel pipe branded Naki Pipe, hot-rolled steel sheet in coil and cold-rolled steel sheet in coil. It is also involved in the trading of various types of steel products and the provision of ground freight transportation services.
Viet Dragon Securities belongs to top 20 biggest securities companies in terms of chartered capital in Vietnam. With a qualified, dedicated and professional team, a widespread network, advanced technology, diversified products and services, and good relationship with local and foreign institutions, we provide a wide range of services and products to our clients both individuals and institutions, both local and foreign. We commit to provide our clients with promising investment opportunities and a comprehensive and professional financial investment services.
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