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The global steel industry is expected to see a recovery in demand this year after weak demand and inventory reduction measures implemented last year. Given this backdrop, investors may consider buying Companhia Sidrjika (SID), Reliance (RS) and Acerinox (ANIOY), which are fundamentally strong steel stocks. read.
Despite persistent headwinds, the steel industry is expanding due to increasing demand from developing countries such as India, favorable government policies focused on infrastructure development, rapid urbanization, demand recovery in China, and technological advances. It is expected that this will happen.
Given the positive outlook for the industry, fundamentally solid steel stocks Companhia Siderúrgica Nacional (Sid), Reliance Co., Ltd. (R.S.) and SA Acerinox (Anoi).
Before we dive deeper into the fundamentals of these stocks, let’s understand what’s shaping the outlook for the steel industry.
The steel industry is an essential part of the global economy, as steel is used for a variety of applications including construction, transportation, energy, and packaging.Global steel market is expected to grow rapidly 2.8% CAGR It is expected to reach $1.8 trillion by 2028.
The global steel market took a hit last year as China, the world’s largest steel consumer, suffered economic hardship due to a real estate crisis. The steel market also slumped due to slowing economic growth in several large countries, leading to a decline in sales.
Inventory reduction was one of the main reasons why steel companies felt margin pressure. According to the World Steel Association, global crude steel production in January 2024 was 148.1 million tonnes (Mt). 1.6% decrease From January 2023.
Major steel manufacturer ArcelorMittal SA (MT) said real demand for steel is likely to remain lackluster this year, but apparent demand is showing signs of improvement as destocking reaches maturity. Genuino Cristino, CEO of MT, said that the world’s apparent steel demand, excluding China, is expected to continue increasing. 3% to 4% YoY in 2024.
China’s economy is expected to continue recovering, with various stimulus measures announced by the government supporting demand growth through infrastructure spending. China’s steel consumption is expected to increase by 2% from zero.
Fitch Ratings believes global consumption will increase and steel demand will continue to grow in most regions. 20 million tons and 30 million tons India will lead demand growth and Turkey will continue its strong recovery. Demand is expected to increase at a moderate pace in Europe, the United States, and Brazil.
Additionally, the steel industry is undergoing a transformation due to advances in artificial intelligence (AI) and robotics. These technologies have the potential to transform industries by increasing automation, strengthening quality control, optimizing supply chains, and enabling predictive maintenance.
Steel manufacturers have the potential to use AI and robotics to improve efficiency, reduce costs, and reduce downtime. Investors’ interest in steel stocks is reflected in the VanEck Steel ETF (SLX) Return for the past 9 months is 17.5%.
With these positive trends in mind, let’s dig into three fundamentals. steel Stock selection begins with the third option.
Stock #3: Companhia Siderúrgica Nacional (Sid)
Headquartered in São Paulo, SID is an integrated steel producer in Brazil and Latin America. He operates through five segments: Steel, Mining, Logistics, Energy and Cement.
SID’s CapEx/Sales for the past 12 months was 8.62%, which was 13.6% higher than the industry average of 7.59%.
SID’s net sales revenue for the third quarter of the fiscal year ended September 30, 2023 was R$11.13 billion ($2.24 billion), an increase of 2.1% compared to the same period last year.Its gross profit and Adjusted EBITDA were 2.81 billion reais ($565.76 million) and 2.82 billion reais ($567.76 million), an increase of 10.5% and 3.7% from the previous year, respectively.
Net income for the quarter was 90.79 million reais ($18.31 million). SID’s current liabilities as of September 30, 2023 were R$20.68 billion ($4.17 billion) and as of September 30, 2022, they were R$21.39 billion ($4.31 billion). There is.
Mr. Street expects SID’s EPS to increase significantly year-over-year to $0.19 for the quarter ending December 31, 2023. Sales for the period are expected to be $2.35 billion, an 8.6% increase from the previous year. Shares have increased 34% over the past six months, closing the last trade at $3.31.
Sid power rating reflects this promising outlook. The overall rating is B, which is equivalent to a “buy” according to our own rating system. POWR Ratings evaluates stocks by 118 different factors, each with its own weighting.
The growth and stability rating is B. Within A rating steel It ranks 15th out of 31 stocks in the industry. Check out SID’s value, momentum, sentiment, and quality ratings. click here.
Stock #2: Reliance Corporation (R.S.)
RS operates as a diversified metals solutions provider and metals service center company. The company sells approximately 100,000 metal products and provides metal fabrication services to general manufacturing, nonresidential construction, transportation, aerospace, energy, electronics and semiconductor manufacturing, and heavy industry.
On February 14, 2024, RS entered into a definitive agreement to acquire all outstanding equity interests and related real estate assets of American Alloy Steel, Inc., a leading distributor of specialty carbon and alloy steel plates and round bars. announced that it had been signed. Contains PVQ material.
This acquisition expands RS’ product portfolio and market position in the specialty carbon steel and alloy steel industry. This is expected to improve RS’ ability to serve customers in a variety of industries, including energy, defense, and manufacturing.
RS’s trailing 12-month ROTA of 12.75% is 350.2% higher than the industry average of 2.83%. ROTC for the trailing 12 months was 12.03%, which is 137% higher than the industry average of 5.08%. Additionally, its trailing 12-month ROCE of 18.04% is 190.9% higher than the industry average of 6.20%.
RS had net sales of $3.34 billion and operating income of $325.1 million for the fiscal fourth quarter ended December 31, 2023. The company’s non-GAAP net income and non-GAAP EPS attributable to RS were $274.4 million and $4.73, respectively.
Additionally, the company’s total current liabilities were $843.6 million as of December 31, 2023, compared to $1.38 billion as of December 31, 2022.
Shares have increased 33.8% over the past nine months, closing the last trade at $320.26.
It’s no surprise that RS receives an overall B rating, which equates to a Buy on the POWR rating system.
B grade for sentiment and quality. It ranks 14th in the industry. In addition to the above, we also evaluated RS on growth potential, value, momentum, and stability.Get all RS ratings here.
Stock #1: Acerinox, SA (Anoi)
Headquartered in Madrid, Spain, ANIOY manufactures, processes and sells stainless steel products. Its products include cold rolled coils, hot rolled coils, rough stock, discs, billets, and plates.
On February 5, 2024, ANIOY announced that North American Steel (NAS), a wholly owned U.S. subsidiary of Acerinox, will acquire Haynes International, a leading developer, manufacturer, and distributor of technologically advanced, high-quality products. announced that they have signed a final contract. Performance alloy.
This acquisition will allow Acerinox to expand its product portfolio and improve its position in the high-performance alloys industry.
ANIOY’s trailing 12-month ROCE of 9.34% is 50.7% higher than the industry average of 6.20%. ROTA for the past 12 months was 3.74%, which is 32.1% higher than the industry average of 2.83%. Additionally, the company’s trailing 12-month asset turnover ratio is 1.07x, which is 56.4% higher than the industry average of 0.68x.
ANIOY’s net sales for the fourth quarter of its fiscal year ended December 2023 amounted to €1.53 billion ($1.66 billion). The company’s EBITDA was 96 million euros ($104.37 million), an increase of 6.7% year-on-year.
Additionally, the company’s current liabilities were €1.95 billion ($2.12 billion) as of December 31, 2022, compared to €1.9 billion ($2.07 billion) as of December 31, 2023. dollar).
ANIOY’s revenue for the quarter ending June 30, 2024 is expected to be $1.95 billion, up 1.1% year over year. Shares have increased 5.1% over the past six months, closing at $5.20.
ANIOY’s strong fundamentals are reflected in its POWR rating. The overall rating is A, which equates to a “strong buy” according to our own rating system.
Ranked 2nd in the steel industry. B grade for value, stability, and quality. To see additional ANIOY ratings on Growth, Momentum, and Sentiment, click here.
What’s next?
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RS stock was unchanged in premarket trading Wednesday. Year-to-date, the RS Index has gained 14.51%, compared to the benchmark S&P 500 Index’s gain of 6.71% over the same period.
About the author: Rashmi Kumari
Rashmi has a passion for capital markets, asset management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With her Master’s degree in Commerce, she hopes to make complex financial issues easier to understand for individual investors and help them make good investment decisions.
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