Sunday, February 27, 2005

Attractively Priced Steel Industry Leaders: Mittal (MT), Posco (PKX)

At current market valuation, the largest U.S. stock exchange-listed steel companies by market capitalization and sales, Mittal and Posco, are trading at the lowest forward P/E ratios:

Company (Ticker): 2005 Est. Sales, P/S, Fwd. P/E, Profit Margin, D/E

Mittal (MT): $33.75 bil., 1.14, 6.0, 24%, 0.34
Posco (PKX): $22.5 bil., 1.12, 5.5, 11%, 0.36
Nucor (NUE): $11.4 bil., 0.86, 16.8, 10%, 0.27
Companhia Sider (SID): N/A, 4.3, 6.6, 31%, 3.3
Kubota (KUB): N/A, 0.77, 13.1, 6.5%, 0.72
U.S. Steel (X): $14.4 bil., 0.48, 11.6, 7.8%, 0.35

(Large steel companies listed only on non-U.S. stock exchanges are: Arcelor (Europe), Nippon Steel (Japan), JFE (Japan) and Baosteel (China).)

This is a curious situation, since market leaders usually trade at higher, not lower, P/E ratios. Mittal (global), Posco (Korean) and Companhia Sider (Brazil) are trading at P/E ratios in the 5 to 7 range, while Nucor (U.S.), Kubota (Japan) and U.S. Steel (U.S.) have P/Es from 11 to 17. It appears that this difference in P/Es could be due to an "established market" bias, with the companies having emerging market operations (Poland, Korea, Brazil, etc.) trading significantly cheaper than their U.S. and Japanese counterparts.

Mittal is the company resulting from the acquisition of 15 steel companies over the past decade by an Indian steel magnate, Lakshmi Mittal, and his Wharton-educated son, Aditya. International Steel Group (ISG) is their most recent acquisition and is expected to close during March. With global operations in North America, Europe, Kazakhstan and South Africa, Mittal is a low-cost producer with high profit margins (24%) and a low D/E ratio (0.34). Having mines that supply 40% of the iron ore and coke needed for their steel production, Mittal is less dependent on upstream suppliers than particularly their Japanese and Korean competitors who do not own mines. This year Mittal also is entering the Chinese market through acquisition of 37% ownership of Hunan Valin Steel. Successful integration of all of its acquisitions could keep Mittal positioned at the top of the steel industry if management is able to execute on its plan to become the world's "most admired" steel company.

Posco is a more regional player, with the majority (69% in 2003) of its production staying in the Korean market. Its primary export market is Asia, with China (taking 11% of its production) and Japan (5%) being its largest Asian customers. Among the non-Chinese steel companies, Posco is best positioned to benefit from increasing demand for steel from continuing growth of the Chinese economy. Unlike Mittal--which is about 90% owned by the Mittal family, has a public float of just 4.5%, and became one of the world's top steel producers only during the past year--Posco began as a government-owned steel company, now has 99% public float and has long been an established player in the steel industry.

As consolidation of the steel industry continues, three or four global players will likely emerge over the next few years. I expect that with consolidation will come greater resilience on the part of the largest companies to withstand the cyclical downturns that have triggered so many bankruptcies and restructurings (recall LTV, Bethlehem, Birmingham, National, others) in the industry in the past.

Mittal, with its global reach and low cost structure, and Posco, being a key supplier of steel to the rapidly growing Chinese market, are two companies to keep an eye on. Their very low P/Es and high earnings growth potential make them quite attractive at current prices. I plan to research industry fundamentals and pore over annual and quarterly reports for these companies during the next few weeks before making a buying decision. I will also be looking for a price pullback (technical short-term buying opportunity) following last week's sharp price run-up.

23 Comments:

Anonymous Anonymous said...

"I just came across your blog about **keyword** and wanted to drop you a note telling you how impressed I was with the information you have posted here. I also have a web site & blog about penny stock advisor so I know what I'm talking about when I say your site is top-notch! Keep up the great work, you are providing a great resource on the Internet here!"

4:37 PM, September 30, 2005  
Blogger St Louis Cardinals BUFF said...

So many blogs and only 10 numbers to rate them. I'll have to give you a 9 because you have a quailty topic.

Free Access To More Information Aboutbuses

1:48 PM, October 11, 2005  
Blogger WellFancyThat said...

Enjoyed your blog - thanks for sharing. I also have an interest in forex online trade. If you have time, check out my site forex online trade. Thanks for taking the time to share your blog.

2:03 PM, October 11, 2005  
Blogger cc Infopage said...

Hello,

I am searching around for fresh information
for my cc Infopage, 30,000 daily updated Information Pages about all kind of subjects.

It might interest you to know that your blog has been visited and has been read. I hope you enjoy your "Blogging".

I wish you all the luck I can, keep the good work going!

Kind regards,
Jos
Today's News From & About eBay

Get the eBay Business Box Today

4:41 PM, October 11, 2005  
Blogger harvey3 said...

Hi great blog i must remember to bokmark you ... I have a horse racing blog myself I also have a new Online Auction to tell you about here travel auction get yourself $35.00 worth of free Advertising travel auction

11:56 PM, October 11, 2005  
Blogger doer said...

Hello, just visited your blog, it's informative. I also have a Eay related web site. Please visit and hope that it's useful.

11:56 PM, October 11, 2005  
Anonymous Anonymous said...

Nice job on your blog! I am book marking your site for future reference.

I have recently created a course estate investing real
site. It pretty much covers course estate investing real
related stuff.

Stop by and check it out if you have time.

8:52 PM, October 12, 2005  
Blogger Free Traffic System said...

Hello,

I liked your blog. I found many interesting information here.
I also give free info about broker commission forex introducing on my
href="http://www.WebTradingSystem.com">Forex Trading System
site.

If you have time please visit my web site to get some free broker commission forex introducing
information.

Kind regards,
Nick

7:17 PM, October 16, 2005  
Blogger Free Traffic System said...

Hello,

I liked your blog. I found many interesting information here.
I also give free info about advanced forex performance system on my
href="http://www.WebTradingSystem.com">Forex Trading System
site.

If you have time please visit my web site to get some free advanced forex performance system
information.

Kind regards,
Nick

9:34 PM, October 16, 2005  
Blogger Free Traffic System said...

Hello,

Your blog is great! I found some useful info here. I also give free info about currency forex system trading. You can seen it on my
href="http://www.timetrapsystem.com">Forex Trading System - Time Trap System
site. Within few days I will upload 100% Free Forex Trading System to it.

If you have time please visit my web site after one week to get some free currency forex system trading information.

7:33 PM, October 17, 2005  
Blogger golfing-babes said...

neat blog there... kudos.. makes me wanna yoddle ai ei oooo ..anyways...lol...

my parents just got a new place down south, if you wanna join us, lemme know..

here are some pics of it, it's right on a golf course golf real estate .. cool huh?

7:58 AM, October 18, 2005  
Blogger Johnny said...

Hello, your blog is inmformative, I just found a brand new forex trading system using both Mathematical and psychlogical approch, hope you can visit and it will be useful to your trading life.

12:28 PM, October 18, 2005  
Anonymous Anonymous said...

Hey nice info you posted.
I just browsing through some blogs and came across yours!

Excellent blog, good to see someone actually uses em for quality posts.

Your site kept me on for a few minutes unlike the rest :)

Keep up the good work!

Thanks!.

1:55 AM, October 19, 2005  
Anonymous Anonymous said...

"I just came across your blog about ebay selling programand wanted to drop you a note telling you how impressed I was with the information you have posted here. I also have a web site & blog about **keyword** ebay selling program so I know I'm talking about when I say your site is top-notch! Keep up the great work, you are providing a great resource on the Internet here!

4:48 AM, October 21, 2005  
Anonymous Anonymous said...

Wow, I really like this one. I have a website that talks mostly about business travel resource You should check it out sometime.

3:10 PM, October 21, 2005  
Anonymous Anonymous said...

"I just came across your blog about ebay skypeand wanted to drop you a note telling you how impressed I was with the information you have posted here. I also have a web site & blog about **keyword** ebay skype so I know I'm talking about when I say your site is top-notch! Keep up the great work, you are providing a great resource on the Internet here!

2:37 AM, October 22, 2005  
Blogger Chris said...

Hey, you have a great blog here! I'm definitely going to bookmark you!

I have a Free Ipod Nano site/blog. It pretty much covers any free ipod nano offer win without related stuff.

Come and check it out if you get time :-)

12:52 AM, October 23, 2005  
Anonymous Anonymous said...

Great blog you have! I really enjoyed it. I heard of a great site that is giving away a free set of Nike Golf Clubs. I think your readers will enjoy it. Just click the link below and enter your Zip Code to see if you qualify!
Free Nike Golf Clubs!

3:24 AM, October 23, 2005  
Anonymous Anonymous said...

This is a good post. I have a site about wyoming real estate please look at it if you can.

4:12 PM, October 24, 2005  
Anonymous Anonymous said...

Mittal, Posco and CSN are typically the lowest priced (selling prices) and therefore, they should not carry a premier compared to Nucor and U.S. Steel. Mittal currently is not collecting higher extras, scrap surcharges, etc. that are available to them in the U.S. market. Other mills are collecting higher prices. Mittal is also doing a poor job servicing their customers compared to Nucor and U.S. Steel.

11:57 AM, March 16, 2007  
Anonymous Web Development said...

Thanks for sharing your info. I really appreciate your efforts and I will be waiting for your further write ups thanks once again.

10:53 PM, September 21, 2011  
Anonymous Stock Tips said...

Great work! This is the type of info that should be shared around the web. Shame on the search engines for not positioning this post higher! Come on over and visit my web site. Thanks =)

10:25 PM, October 21, 2012  
Blogger Surelia Dev said...

The primary purpose of the Urban Aero Systems is to introduce cutting-edge aerospace technologies, while having its own modern infrastructure, with an experienced team in Aviation
Inflatable Boats in India
Fec Heliports

2:21 AM, April 14, 2015  

Post a Comment

<< Home