CSC Steel's outlook positive following strong earnings
CSC Steel reported an adjusted net profit of RM14.8mil for 1Q25, surpassing the research house's expectations, accounting for 43.1% of its full-year forecast.
It said the positive deviation was primarily driven by lower-than-anticipated input costs, which translated into improved profit margins.
Revenue declined by 17.3% year-on-year (y-o-y) largely due to softening demand for steel products and subdued average selling prices.
Despite the revenue contraction, TA Research said adjusted net profit rose 19.2%, thanks to easing raw material costs and a lower effective tax rate.
It pointed out that CSC Steel's balance sheet remains strong, with zero borrowings and a net cash position of RM347.7mil.
'Following the stronger-than-expected earnings performance, we have adjusted our cost assumption for certain steel products.
'Consequently, our FY25-FY27 earnings forecasts have been revised higher by 47.3%,24.8%, 8.4% respectively,' it added.
The research house has upgraded its 'sell' to 'hold' call for CSC Steel with a higher target price of RM1.23 versus RM1.02, after factoring in the upward revision in earnings.
It explained that the upgrade was due to the company offering a balanced risk reward profile amid an evolving market landscape, while having an attractive dividend yield of 6.3%, based on our projected dividend yield of 7.5 sen a share.
Meanwhile, TA Research expected the Malaysia's steel market to continue facing persistent oversupply pressures due to China's excessive production capacity and illegal imports.
This is despite the implementation of a new five-year Anti-Dumping Duties Act (effective mid-May 2025) targeting certain steel products.
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