Equity, Bottom-up Analyst, Investics Research

Sameer Taneja

Equity, Bottom-up Analyst

Kelusa Asia Focus Funds

Equity Bottom-Up

Almost all Q1 results are out now and i thought i'd do a piece where I talk about how much worse things have gotten yet the street continues to remain optimistic on certain names.  This is a clear case of tunnel vision for the community watching steels in those particular geographies as analysts/PM's think that all is well, guidance based on spot prices is fantastic and hence this bodes well for share prices. I will take 4 names and we can see guidance for all names have been quite phenomenal. But share price action very different. 1. X  US- guidance of +400 million USD of EBITDA for FY16 with a 500 USD/ ton steel price ( this was stated as guidance under conditions at the time of release of results ) , steel prices have gotten incrementally better since then. The amazing part of this is they posted a -107 million USD EBITDA in Q1 2016.2. BSL AU - Great guidance again 250 million of EBIT for H2 with great cost out achievements similar to X. Stock was up 7% on this guidance. 3. JSW IN - Reported a quarterly profit beating analyst expectations they too guided for significantly better results in subsequent quarters owing to higher steel prices 4. MT NA - A 920 mn USD EBITDA but a guidance for subsequent quarters to be much higher infact a look at analyst estimates will show them going to the 1.3 bn USD levels on guidance which is 40% higher than what they showed in Q1Guidance really is meaningless when the future direction of steel prices is downwards which is why we need to look at the Chinese prices very carefully.  Now stocks Arcelor Mittal  ( MT NA ) and US Steel ( X US ) are to a certain extent reflecting how bad things can get whereas JSW , BSL and TATA  are the other end of the spectrum where steel price direction is being ignored and quarterly guidance is being used a barometer for confidence in the names.

Almost all Q1 results are out now and i thought i'd do a piece where I talk about how much worse things have gotten yet the street continues to remain optimistic on certain names.  This is a clear case of tunnel vision for the community watching steels in those particular geographies as analysts/PM's think that all is well, guidance based on spot prices is fantastic and hence this bodes well for share prices. I will take 4 names and we can see guidance for all names have been quite phenomenal. But share price action very different. 1. X  US- guidance of +400 million USD of EBITDA for FY16 with a 500 USD/ ton steel price ( this was stated as guidance under conditions at the time of release of results ) , steel prices have gotten incrementally better since then. The amazing part of this is they posted a -107 million USD EBITDA in Q1 2016.2. BSL AU - Great guidance again 250 million of EBIT for H2 with great cost out achievements similar to X. Stock was up 7% on this guidance. 3. JSW IN - Reported a quarterly profit beating analyst expectations they too guided for significantly better results in subsequent quarters owing to higher steel prices 4. MT NA - A 920 mn USD EBITDA but a guidance for subsequent quarters to be much higher infact a look at analyst estimates will show them going to the 1.3 bn USD levels on guidance which is 40% higher than what they showed in Q1Guidance really is meaningless when the future direction of steel prices is downwards which is why we need to look at the Chinese prices very carefully.  Now stocks Arcelor Mittal  ( MT NA ) and US Steel ( X US ) are to a certain extent reflecting how bad things can get whereas JSW , BSL and TATA  are the other end of the spectrum where steel price direction is being ignored and quarterly guidance is being used a barometer for confidence in the names.

Angang Steel Co Ltd (H) / Equity Bottom-Up

I have attached a few charts that are quite interesting and show steel price rise is hitting a roadblock and faces potential headwinds.Before that my conclusions are just briefly written here :<ol>
<li>The cause for the steel price rally was stimulus, not Chinese steel production being taken out.</li>
<li>Stimulus has helped steel prices in the past but since 2014 it was not helping till Jan 2016 where we saw an unprecedented level of stimulus.</li>
<li>Structurally margins for steel in China are trending downwards.</li>
<li>Spot…</li>
</ol>

I have attached a few charts that are quite interesting and show steel price rise is hitting a roadblock and faces potential headwinds.Before that my conclusions are just briefly written here :
The cause for the steel price rally was stimulus, not Chinese steel production being taken out.
Stimulus has helped steel prices in the past but since 2014 it was not helping till Jan 2016 where we saw an unprecedented level of stimulus.
Structurally margins for steel in China are trending downwards.
Spot…


Luxembourg

ArcelorMittal produces steel. The Company manufactures cold rolled, electrogalvanized and coated steels, slabs, bars, and wire rods. ArcelorMittal serves customers worldwide.

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ArcelorMittal (MT NA)

JSW : The Last Man Standing ?

Almost all Q1 results are out now and i thought i'd do a piece where I talk about how much worse things have gotten yet the street continues to...

Sameer Taneja

Steel Does the Rally End Here ?

I have attached a few charts that are quite interesting and show steel price rise is hitting a roadblock and faces potential headwinds.Before that...

Sameer Taneja

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