2024-04-07 02:16:49 ET
Summary
- The Brazilian steel industry is suffering from the large supply of Chinese steel in the domestic market. And there should be no action by the Government to protect the national.
- Domestic market demand remains weakened, coupled with the strong supply of Chinese steel and difficulty in passing on the price. Result? Low margins.
- Additionally, given the capital-intensive nature of the sector, SID trades at the highest P/B among its competitors, meaning it has a stretched valuation.
Investment Thesis
I recommend selling the shares of Companhia Siderúrgica Nacional (SID). The Brazilian steel industry is suffering from the large supply of Chinese steel in the domestic market. Additionally, there is no Government action to protect the national industry, this is due to the importance of China as Brazil's trading partner.
Domestic market demand remains weak, making it difficult to pass on the price. Result? Low margins, and by the way the company has the lowest margin among its Brazilian competitors. This is due to the priority of capital allocation in the growth of operations....
Read the full article on Seeking Alpha
For further details see:
Companhia Siderúrgica Nacional: Competition, Low Margins And High Leverage