Analyst Pin-board SMC – Q3 Could be the Hardest Time of the Year
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· Profits reduced 82% YoY in 1H2022 because gross profit margin dropped to 3% from 10.1% in 1H2021, a sharp increase in losses from exchange rate difference and high interest expense. · Processing orders are weak and plans to invest in new factories are being delayed. · In 2H, we expect a loss in Q3 due to high-priced inventories before a recovery in Q4. HRC price seem to have bottomed in August but is not likely to rally quickly in a short time, amid high uncertainties of pandemic, geopolitics and high inflation. Pressures on the profit margin of the processing segment will be high as the material inventory period of this segment is higher than that of the trading segment. · For the whole year 2022, we forecast revenue and NPAT-MI to arrive at VND 24,164 bn (+13% YoY) and VND 106 bn (-88%) with a loss of VND 62 bn in Q3. · SMC is now trading at a TTM PER of 4.8x, higher than 2.9x of 2021. However, as this year profit will be lower compared to the peak of last year, the PER forward for 2022 is 13.7x. Thus, the stock seems unattractive at the current valuation. We recommend to OBSERVE SMC until demand shows signs of firm recovery. |
SMC Trading Investment Joint Stock Company is a Vietnam-based company engaged in the steel industry. The Company manufactures and trades steel products used for construction and interior decoration purposes, such as steel rebar, steel wire rod, steel beam, steel frames and steel shapes. It is also involved in construction activities, real estate operations and the offering of interior design services and house repair services. Other activities include the provision of courier and warehousing services. As of December 31, 2012, the Company had six subsidiaries and two affiliates, along with two branches in Hanoi and Danang City.
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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