Maanshan Iron & Steel (SEHK:323): Losses Widen 63.6% Annually, Turnaround Hopes Eye Profit in 3 Years

Maanshan Iron & Steel (SEHK:323) has remained unprofitable, with losses widening at an average pace of 63.6% per year over the past five years. Although revenue is forecast to grow modestly at 0.4% each year, which is well behind the Hong Kong market’s 8.7% pace, analysts expect earnings to turn around sharply, with projected annual earnings growth of 74.66% and a return to profitability within three years.

See our full analysis for Maanshan Iron & Steel.

The real test is how these numbers stack up against the prevailing market narratives, with some expectations confirmed and others potentially called into question.

See what the community is saying about Maanshan Iron & Steel

Margins Expected to Swing from -4.7% to 4.5%

• Analysts expect profit margins to rise from -4.7% today to 4.5% in three years, a major turnaround considering ongoing industry headwinds and Maanshan Iron & Steel's unprofitable track record.
• According to analysts' consensus view, margin recovery should be supported by:
  • A shift in sales mix toward higher-value steel products, digitalization, and new energy applications is projected to improve average selling prices and earnings stability.
  • Heavy investment in cost optimization and "green steel" possibly allows the company to capture premium pricing and avoid regulatory penalties. However, this positive view remains at odds with ongoing weak demand and rising cost pressures prevalent in the sector.

What’s particularly interesting: even with progress on margins, analysts still see considerable tension between long-term strategy and today’s lacklustre profitability. Dig into the full consensus narrative for all the key inflection points. 📊 Read the full Maanshan Iron & Steel Consensus Narrative.

Overcapacity and Supply Risks Weigh on Stability

• Raw materials and fuel make up over 80% of Maanshan Iron & Steel’s costs, with approximately 76% of iron ore sourced from overseas (mainly Australia); this exposes the business to extreme cost swings and supply chain vulnerabilities, especially during periods of market or geopolitical stress.
• Bears highlight several material concerns:
  • Utilization rates remain low, with multiple production lines operating at under 75% of capacity. The broader trend of four consecutive years of declining domestic steel demand signals further downside risk.
  • Lagging innovation and slow progress transitioning to advanced green and specialty steels could result in margin erosion and lost market share, particularly as compliance costs increase and competition intensifies both in China and abroad.

Sales Valuation: Discount on Sales, Premium on Price

• Maanshan trades at a Price-to-Sales ratio of 0.2x, a deep discount against the Hong Kong Metals and Mining industry average of 1x and a peer group average of 1.8x. However, at a current share price of HK$2.55, the stock still sits well above its DCF fair value of HK$0.43 and the analyst price target of HK$2.32, suggesting the market is pricing in a stronger turnaround or a more optimistic future than models suggest.
• According to analysts' consensus view, the relatively narrow gap between the current share price and the consensus price target implies that the market is mostly factoring in anticipated earnings growth:
  • If Maanshan hits forecasts for CN¥3.6 billion in earnings and a PE of 5.4x by 2028, the current price implies some investor belief in the turnaround thesis.
  • Yet, the presence of a premium to fair value highlights that financial positioning and persistent industry risks could cap upside if progress stalls or headwinds worsen.

Next Steps

To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for Maanshan Iron & Steel on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

Got a unique read on these figures? Share your perspective and help shape a fresh narrative. In just a few minutes, your view could spark new insights. Do it your way

A great starting point for your Maanshan Iron & Steel research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.

See What Else Is Out There

Despite optimism for margin recovery, Maanshan Iron & Steel faces persistent overcapacity, fluctuating costs, and profitability that remains well below industry standards.

If you want to sidestep volatile valuations and weak earnings, target value opportunities trading at a real discount with these 831 undervalued stocks based on cash flows now.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com