STEEL (NEUTRAL) Sector Update (OSK)

While the recent rally lent some colour to our recommendation, we are now revisiting the steel industry’s macro outlook, key assumptions as well as valuation parameters. Despite the higher fair values post-revision, we are slashing our recommendations for those stocks that have run ahead of their fundamentals and the lack of re-rating catalyst. Investors should switch to Lion Industries (TP: RM1.90), Southern Steel (TP: RM1.93) and Masteel (TP: RM1.09) that still offer decent upside, SELL Ann Joo (TP: RM1.25), Kinsteel (TP: RM0.59) and Perwaja (TP: RM1.11). However, as we have downgraded half of the stocks under our universe to SELL, we downgrade our steel sector recommendation to NEUTRAL.