Thursday, June 18, 2015

Seeking Alpha: POSCO Another 'Wait And See' Story

It's not hard to find a steel company that looks undervalued on the basis of past cycles today, but there's a very real question now as to whether the large global players like ArcelorMittal (NYSE:MT) and POSCO (NYSE:PKX) will see the same sort of upturns as in the past given the increasing size and influence of Chinese mills. Relative to ArcelorMittal, POSCO is more leveraged to growing markets (relatively little of its exports go to North America or Western Europe) and the company can still benefit from a more lucrative mix and lower-cost production technologies.

I was much too early in liking POSCO a year ago, as pretty much the entire steel sector has continued to underperform on mediocre demand growth and increasing Chinese exports. Although I do believe it will be difficult for POSCO to achieve the sort of growth and margins it has seen in past upturns, I think valuation is looking pretty washed out at today's price.

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POSCO Another 'Wait And See' Story

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