SMC - Increasing steel price boosts the net income to a new peak in 1Q
SMC’s business is becoming more sustainable as its coil service and production segments are playing a more important role and its trading risk is managed better. Besides, SMC has strong competitiveness owing to its high-quality services, diversified products, and presence in key areas. In the coil processing segment, SMC’s new contract of supplying coil service for Samsung shows it can meet high standards of product quality, material sources and on-time delivery. Investments in new coil processing factories will help the company to seize opportunities as FDI inflows are expected to surge, leading to stronger demand.
Taking into account the better outlook for the steel industry, we rise up SMC’s P/B to 1.0 (previously 0.6x) and P/E to 5.0 (previously 4.3x). Besides, we adjust the forecast for NPAT in 2021 from VND 176 billion to VND 340 billion due to the surging HRC price, which increased 40% over last three months. Hence, we revise up our target price to VND 30,200 from 14.100 per share. Together with a cash dividend in the next 12 months of VND 1,000/share, the total return is 13%, based on the closing price of VND 27,600/share as of March 10th, 2021. Hence, we recommend to ACCUMULATE this stock.
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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