PUBLISHED : Sunday, 06 July, 2003, 12:00am
UPDATED : Sunday, 06 July, 2003, 12:00am

Core Pacific-Yamaichi has revised upwards its target price for steel maker Angang New Steel to HK$1.97 from $1.65 and has maintained its buy recommendation.

Long steel prices have increased more than expected in the second quarter of the year due to strong demand from mainland infrastructure projects. Demand from the west to east pipeline, power transmission and the Three Gorges project should support steel prices in the second half. Sales volume has been strong, reaching 1.7 million tonnes for the first five months, which is on track to meet the broker's full-year forecast of 4.2 million tonnes of steel products.

The company's second production line of cold rolled steel (CRS) began production in May, a month ahead of expectations. Capacity will be increased to 1.6 million tonnes from 1.4 million tonnes. CRS prices slipped in April but remained steady in May.

Angang has also started pilot production of coated steel, and galvanized steel production is expected to start in the fourth quarter.

Trading at a price-earnings ratio of seven times on the forecast for 2003, at 5.6 per cent yield and price-to-book ratio of 0.69 times, the counter is not expensive. Given the better-than-expected long product prices and a conservative earnings estimate, the broker believes the risk is on the upside.

The revised price target of $1.97 would give an upside of about 12 per cent on the share price. The broker says that since it initiated coverage of Angang on April 30, the counter has surged 44 per cent. It closed at $1.82 on Friday.