We maintained our Neutral recommendation on,
Companhia Siderurgica Nacional
as the long-term growth prospects get marred by our near-term
By and large, the growth prospects of the steel industry seem
to be bright. With the global economy reviving gradually, demand
for better infrastructure and agricultural needs is also soaring
which, in turn boosts demand for steel worldwide. As projected by
the World Steel Association, the apparent global steel
consumption is expected to increase 3.2% in 2013.
The Brazilian steel industry is no exception; as steel demand
in Brazil has been increasing with the country gearing up to host
two major sporting events; the 2014 Soccer World Cup and 2016
Olympic Games. Also, huge government investments to improve
infrastructure and manufacturing and construction industries are
fueling steel demand.
We find CSN well equipped to leverage benefits from the
growing steel market in the domestic as well as the international
arena. The company has been making investments to improve its
production capabilities and services. Total capital spending is
expected to be R$3.1 billion in 2013.
Despite these positives, near-term concerns and financial
performances keep us on the sidelines for CSN.
CSN posted weak financial results for the fourth quarter 2012
with net income falling 61% year over year. Cost of sales rose
47%, offsetting revenue increase of 10% in the quarter. Moreover,
the prevailing weakness in the European market, slow growth in
China and sluggish growth in the United States are impacting the
steel industry worldwide.
Other Stocks to Consider
CSN is one the recognized Brazilian steel makers and currently
has a market capitalization of US$6.5 billion. Other stocks to
watch out for in the industry are
Shiloh Industries Inc.
Gibraltar Industries, Inc.
Nippon Steel & Sumitomo Metal Corporation
), each holding a Zacks Rank #1 (Strong Buy).
NIPPON STEEL CP (NSSMY): Get Free Report
GIBRALTAR INDUS (ROCK): Free Stock Analysis
SHILOH INDS INC (SHLO): Get Free Report
CIA SIDERUR-ADR (SID): Free Stock Analysis
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