CAIRO: HC Research cut Egypt’s Ezz Steel’s share-price target by 11 percent, citing lack of clarity on iron ore prices and scrap price volatility.
The brokerage, which cut its price target on the stock to LE 23.5, also lowered earnings estimates for Egypt’s largest steelmaker.
HC Research said it saw a slowdown in local demand and the delay in start of operations of the company’s new direct reduced iron (DRI) plant hurting its market view.
"The inability to raise prices in July and August due to an inventory pile up (caused by a slowdown in local demand) indicates that Ezz Steel may witness margin pressure in third quarter," HC Research analysts wrote in a note to clients.
The company has been buying iron ore — a key raw material — in the third quarter at provisional prices, which the brokerage believes could be 20 percent higher than the second quarter contractual prices.
However, the medium term outlook for iron ore prices seems favorable for steel producers as more global capacity is expected to come on stream, it said.
HC Research, which also cut its price target on shares of Ezz Dekheila Steel, a unit of Ezz Steel, by 21 percent to LE 1,151, maintained a "buy" rating on Egypt’s steel coverage.
