UBS downgraded MAS C.L. to "Sell" with a focus on the business outlook for the fourth quarter

UBS released a report stating that Maanshan Iron & Steel (00323.HK) turned a profit in the first three quarters of this year, recording a net profit of RMB 84 million, reversing the loss of RMB 2.535 billion in the same period last year. The gross profit per ton of steel rose to RMB 180, catching up to industry levels after underperforming the market for four years, driven by synergies from Baosteel.

The bank indicated that although the performance met expectations, the outlook for the fourth quarter remains unfavorable due to peak season demand being brought forward to the third quarter, and winter may restrict sales from November to December, with Maanshan Iron & Steel's gross profit per ton of steel potentially dropping to around RMB 80. Additionally, operational issues such as unstable blast furnace output, aging product structure, and internal competition have yet to be resolved.

The bank raised its target price for Maanshan Iron & Steel from the previous RMB 1.90 to RMB 2.35, downgrading its rating from "Neutral" to "Sell," and noted that the current stock price is equivalent to a price-to-book ratio of 0.8 times, which is over two standard deviations above the five-year average