Brokers generally see value in
-Brokers are generally positive on
-
-A backlog of up to one year exists for the Australian steel products division
-US spreads are down though
-Macquarie more cautious on the outlook
By
Given
Over the past decade, the company has restructured its relatively high-cost (globally) Australian operations away from competitive commodity export markets to value-added metal coated and painted product brands.
The broker points to value on a one-year basis, despite the subdued macroeconomic backdrop and the rising risk of a FY24 downturn for Australian end-markets. It's felt the US end-markets for cars and non-residential construction will benefit from a normalisation of supply chains, which should lend some support in a potential US downturn.
The company is trading at an around -40% discount to key peers such as American steel producers
The other five brokers in the FNAreana database seemingly agree with Buy-rated
The company continues to take share in the Australian Steel Products (ASP) division, with robust Colorbond pricing and a strong pipeline of work, according to
The analyst also suggests the North Star Steel facility in Ohio, currently trading at a significant discount to US peers, remains a quality asset, despite spreads falling below the long-run average of
Once buoyant US spreads have eroded significantly in the last month. US mini mill spreads have fallen to
Last week, Jarden noted US steel spreads are coming under pressure from a falling HRC price, which had slipped to a new 2022 low of
However, the analysts believe US steel HRC prices were close to a bottom and suggested BlueScope is set to reiterate first half underlying earnings (EBIT) guidance of
Jarden, not one of the seven brokers updated daily in the FNArena database, maintained its Overweight rating and lowered its target price to
Apart from US steel demand and the steel spread, the broker listed other downside/upside risks including Australian and US construction activity, the macroeconomic outlook in
Other broker views on BlueScope
Two weeks ago, Buy-rated Citi encouraged investors to look past a likely upcoming and material short-term earnings correction resulting from the economic backdrop, given BlueScope was trading at an around -20% discount to the broker's valuation.
The analysts cited upcoming volume expansion at
Housing is important, as in
Macquarie (Neutral) reviewed its BlueScope investment thesis just under a month ago and remained cautious on the outlook for price and spread outcomes, in light of the macroeconomic conditions.
On a longer-term view, the broker also noted a complex path to decarbonisation for the steel industry, made more complex by the quality of steel required from blast furnace producers like
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