Analysts Expect Chongqing Iron & Steel Company Limited (HKG:1053) To Breakeven Soon

Chongqing Iron & Steel Company Limited (HKG:1053) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Chongqing Iron & Steel Company Limited, together with its subsidiaries, engages in the production and sale of steel plates in the People’s Republic of China. The HK$14b market-cap company posted a loss in its most recent financial year of CN¥3.2b and a latest trailing-twelve-month loss of CN¥3.0b shrinking the gap between loss and breakeven. The most pressing concern for investors is Chongqing Iron & Steel's path to profitability – when will it breakeven? We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

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Expectations from some of the Hong Kong Metals and Mining analysts is that Chongqing Iron & Steel is on the verge of breakeven. They expect the company to post a final loss in 2024, before turning a profit of CN¥40m in 2025. The company is therefore projected to breakeven around 12 months from now or less. At what rate will the company have to grow in order to realise the consensus estimates forecasting breakeven in under 12 months? Using a line of best fit, we calculated an average annual growth rate of 118%, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.

Underlying developments driving Chongqing Iron & Steel's growth isn’t the focus of this broad overview, but, keep in mind that by and large metals and mining companies, depending on the stage of operation and metals mined, have irregular periods of cash flow. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

View our latest analysis for Chongqing Iron & Steel

Before we wrap up, there’s one issue worth mentioning. Chongqing Iron & Steel currently has a relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in Chongqing Iron & Steel's case is 41%. Note that a higher debt obligation increases the risk in investing in the loss-making company.

Next Steps:

There are too many aspects of Chongqing Iron & Steel to cover in one brief article, but the key fundamentals for the company can all be found in one place – Chongqing Iron & Steel's company page on Simply Wall St. We've also compiled a list of key aspects you should further research:

1. Valuation: What is Chongqing Iron & Steel worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether Chongqing Iron & Steel is currently mispriced by the market.
2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Chongqing Iron & Steel’s board and the CEO’s background.
3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.