Shares in Angang Steel, the listed arm of the mainland's second-largest steelmaker, plunged 8.21 per cent yesterday in Hong Kong after some analysts downgraded the stock's rating following the company's disappointing earnings.
The Anshan, Liaoning-based steelmaker said on Monday night that last year's net profit rose 6.2 per cent to 7.53 billion yuan (HK$8.39 billion), lagging behind an 8.58 billion yuan average estimate from 21 analysts polled by Thomson Financial.
Fourth-quarter earnings totalled 969 million yuan, down 45 per cent from the third quarter, according to analysts' estimates. The company's outlook remained grim with iron ore and coking coal costs rising, despite a 2 per cent gain in first-quarter profit, analysts said.
Credit Suisse cut Angang's rating to 'underperform' from 'neutral' and lowered its 2008 earnings forecast by 4 per cent and 2009 earnings by 22 per cent.
'We maintain our view that the best quarter for 2008 is likely to be the first quarter, and risk on the unit profit for flat products would be on the downside going into the second half, driven by higher input costs and potential demand elasticity under strong steel prices,' Credit Suisse said.
Merrill Lynch downgraded Angang from 'neutral' to 'sell' saying that cost pressures continued this year and 'not only from raw materials, but across the board'.