(VEN) - Domestic steel businesses are growing well and several listed stocks of steel businesses have stable financial situation, high profit possibility and attractive Price to Earning Ratio (P/E). Domestic steel businesses are developing well and several listed stocks of steel businesses have stable finances, high possibilities of profits and attractive Price to Earning Ratios (P/E). Vietnam is on the period of fostering construction investment and infrastructure development bringing more opportunities for the development of the steel industry. Since 2001, steel production volume has grown 15 percent on average. The Ministry of Industry and Trade estimated that steel production volume will increase from 15 to 20 percent on average in the coming years. Vietnamese steel businesses have developed extensively and intensively. From entirely importing steel billet, big steel businesses have invested strongly in input production. Specifically, four major Vietnam Steel Association companies, Thai Nguyen Steel and Iron Joint Stock Company, the South Steel Joint Stock Company, the Hoa Phat Group and Pomina have built steel billet plants with total capacity of 4.5 million tonnes. The four companies are expected to meet approximately 50 percent of the country steel billet demand by 2016. Some listed stocks of steel businesses have stable financial situation, high possibility of profit and attractive Price to Earning Ratios (P/E). However, the steel sector is encountering difficulties. For example, high interest rates have affected steel businesses because most of them have taken major short-term loans to cover inventories. With such high current interest rates, steel business profitability will be remarkably affected. The international steel billet price increased over 50 percent against 2010 and the adjustment of interest rates in early 2011 have considerably affected input costs, as input materials are mostly imported. Increasing steel supply as new steel roll plants are under operation has resulted in difficulties for steel sales. In addition, the limitation in industry and trade investment in 2011 will impact steel demand in general. In the current situation, all the advantages belong to major-sized businesses that have taken the initiative in focusing on input materials (steel billet), combined with effective distribution channels and strong financial potential. Meanwhile, businesses that focus only on rolling and producing end-product may face difficulties due to the fluctuation in input materials. Of steel businesses that are listed on the stock markets, the Hoa Phat Group and Pomina are big-sized businesses that focus on input segment. However, the liquidity of Pomina stock is low. Therefore, Hoa Phat Group stocks are more likely to suit investors. against 2010 and the adjustment of interest rate in early 2011 have affected considerably input costs of steel businesses as input materials are mostly imported. Increasing steel supply as new steel roll plants are under operation results in difficulties in steel sale. In addition, the limitation in industry and trade investment in 2011 will impact on steel demand in general. According to current situation, advantages belong to big-sized businesses that take the initiative in input material (steel billet), have effective distribution channels and strong financial potential. Meanwhile, businesses that focus only on rolling and producing end-product may face to difficulties due to the fluctuation of input materials. Of steel businesses that are listed in stock exchange floor, Hoa Phat Group and Pomina are big-sized businesses that focus on input segment. However, the liquidation of Pomina stock is low. Therefore, stock of Hoa Phat Group is more suitable for investors./. By Hoang Nguyen |
