Six months ago management was of the opinion the industry structure was the best in 10 years. Since then, weak Chinese hot-rolled coil prices have meant the North Star spread has fallen around -35% to US$360/t and the broker notes incremental new supply is coming to the US.
No material lift in spreads is factored in for the short term and the broker suggests the risk is towards the upside for FY20 earnings.
In Australia, UBS expects a weakening of demand for the company’s highest-margin Colorbond product, although notes BlueScope does not appear too worried about a slowdown in housing.
Still, these tonnages are its most profitable. UBS maintains a Buy rating and $16 target.
Sector: Materials.
Target price is $16.00.Current Price is $13.55. Difference: $2.45 – (brackets indicate current price is over target). If BSL meets the UBS target it will return approximately 15% (excluding dividends, fees and charges – negative figures indicate an expected loss).
