KUALA LUMPUR (Nov 27): TA Securities has upgraded its recommendation on flat steel products maker CSC Steel Holdings Bhd to "buy" at RM1.23, and raised its target price to RM1.38 (previously RM1.23), based on nine times earnings estimated for the financial year ending Dec 31, 2024 (FY2024), on the back of an improved outlook for the domestic steel industry, following the government’s intervention to address challenges faced by local steel players. 

In a note on Monday, the research house projected sales volumes for CSC — which offers a range of flat steel products for various applications, such as building materials, hardware, home appliances, and cold rooms — to be further boosted in the upcoming quarters, driven by increasing demand from the construction and industrial sectors.  

According to TA Securities, CSC’s core profit for the first nine months ended Sept 30, 2023 of RM400,000 was within expectations, despite lower revenue of RM1.18 million (down 11.6%), due to weaker selling prices.

Besides, the research house noted that CSC — a subsidiary of China Steel Corporation —  will benefit from a two-year moratorium rate by the Ministry of Investment, Trade and Industry for the group to reassess the numerous challenges it faces.  

“We are optimistic about this move, as it will help to resolve some of the long-standing issues, such as overcapacity and steel dumping,” the research house said.  

TA Securities also highlighted that CSC had a solid balance sheet, with zero borrowings, and a net cash position of RM350 million as of the third quarter ended Sept 30, 2023.  

The research house expects CSC to maintain a high dividend payout ratio of above 50%, translating into an attractive dividend yield of 6.6% to 7.0% for FY2023 to FY2025.