Result Update Report: NKG - Lacking drivers for substantial recovery
Sluggish demand in both local and global GI/GL and steel pipe markets is going to continue its pressure on NKG’s business performance in the intermediate and long term as HRC price could move unfavourably for the company, even though Q2/2023 earnings could be a relief because of low-cost inventory. Toward the end of the year, NKG is going to face up with slow recovery in steel demand, large inventory holding and HRC’s short-term downtrend. As NKG’s business performance has become unstable and difficult to estimate, we presume that the fair value of NKG share revolves around its book value, equivalent to VND 16,900 per share (P/B at 1,0x), +6.6% from its closing price on June 02nd, 2023. The upside represents a temporary turnaround in NKG’s earnings in Q2 due to low-cost inventory. NKG is not paying out cash dividends in 2023, so the total return for the stock offers a NEUTRAL recommendation. Regarding any possible buy-and-hold opportunity, we suggest investors monitor GI/GL and steel price sales volume closely, particularly GI/GL export activities to anticipate an investment opportunity, if any, to accumulate NKG and other steel stocks in the medium and long-term.
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.
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