Result Update Report: SMC - Short-term support from steel prices vs. Medium-term receivables risk
Having gone through the most difficult time since its listing, SMC as a trading and manufacturing steel company can now recover quickly because steel prices have been going up since the beginning of the year. The speed of recover depends on its overall sales volume across all of its business segments, which is its ability to achieve desirable scales to offset the increasing interest expense incurred by the capacity expansion during the last couple years. We appreciate SMC’s ability to recover faster than its peers in the upstream parts of the steel industry. However, we recommend to WATCH the stock because of an unresolved receivables at Novaland, one of its major trading customer, while we seek assessments of such event on SMC’s future earnings, liquidity and financial solvency.
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