UBS: Downgrade MAANSHAN IRON (00323) to "Sell" with focus on fourth quarter business outlook

UBS released a research report stating that MAANSHAN IRON (00323) turned losses into profits in the first three quarters of this year, recording a net profit of 84 million yuan, reversing a loss of 2.535 billion yuan in the same period last year. The gross profit per ton of steel rose to 180 yuan, catching up to industry levels after trailing the market for four years, driven by the synergies with Baosteel. The target price for MAANSHAN IRON was raised from the original 1.9 Hong Kong dollars to 2.35 Hong Kong dollars, and the rating was downgraded from "neutral" to "sell", with the current stock price equivalent to a price-to-book ratio of 0.8 times, more than two standard deviations above the five-year average. UBS pointed out that despite meeting expectations, the outlook for the fourth quarter is still unfavorable, as peak season demand came early in the third quarter, and winter may restrict sales in November and December. The gross profit per ton of steel for MAANSHAN IRON may fall to around 80 yuan. In addition, operational issues such as unstable blast furnace production, aging product structure, and internal competition have not been resolved.