08.29.2001
China Steel earnings forecast revised down

• Development: China Steel revised down its FY01 revenue forecast to NT$85.9bn from NT$92.7bn and pretax earnings forecast to NT$10.5bn from NT$17bn.

• Analysis: Revised forecast is lower than our conservative pretax earnings estimates of NT$12bn, likely due to uncertainty of stock divestment and a pessimistic steel outlook for 4Q01.

• Primasia View: Although valuation looks attractive (i.e. P/E 11x), we are concerned about sluggish steel prices and management’s current strategy (such as proposed plant expansion and protection of downstream steel makers).