This report is the updated version of the report uploaded on 6 December 2022 at 4:51 PM (GMT +11)

BlueScope Steel Limited

BLS Details

BlueScope Steel Limited (ASX: BSL) is one of the major manufacturers of painted and coated steel products globally.

Financial Results for the FY22

• BSL reported FY 2022 NPAT of $2.81 billion, reflecting a rise of 135%, or $1.62 billion increase as compared to FY 2021. It posted underlying EBIT of $1.58 billion in H2 FY 2022, the second-best half-year result on record.
• The company witnessed continued robust demand for its steel products as well as solutions despite recent macroeconomic and geopolitical volatility.
• Notably, operating cash flow, after capital expenditure including on the North Star expansion, amounted to $1.71 billion.

Key Updates

• Tania Archibald has now been appointed as Chief Executive Australian Steel Products. Notably, an external recruitment search is underway for the CFO. In the meantime, Mark Scicluna would be taking on the role of Acting CFO.

Outlook

The company has provided an update on H1 FY 2023 trading conditions. With regards to Australian Steel Products, the business is anticipated to post lower result than H2 FY 2022. With respect to North Star BlueScope Steel, North Star is anticipated to deliver a result around a third of H2 FY 2022. However, the expectations are subject to macroeconomic, spread, foreign exchange as well as market conditions.

Key Risks

The company is exposed to the risks related to the decline in the steel prices, fluctuations in the foreign exchange rates, etc.

Fundamental Valuation

EV/Sales Based Multiple Based Relative Valuation

Stock Recommendation

Over the last 3 months, the stock rose by ~16.03%. It has made a 52-week low and high of $14.745 and $22.430, respectively.

The stock has been valued using EV/Sales multiple-based illustrative relative valuation and the target price so arrived reflects the potential decline of low double-digit (in % terms). A slight discount has been applied to EV/Sales Multiple (NTM) (Peer Average) considering the risks associated with the business.

Considering the resistance and target level achievement and current trading levels, it is prudent to book profits at the current levels.

Hence, a ‘Sell’ rating has been provided on the stock at the current price of AUD18.58 per share as of 6 December 2022 (Australia Time: 11:57 AM (GMT +11)).

Technical Overview:

Daily Price Chart

Markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for share price chart and stock valuation is based on December 6, 2022, and all other data such as stock price performance as of December 7, 2022. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Disclaimer

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