(Image: CSN/Disclosure)
A Genial Investments downgraded the recommendation for shares of CSN Mining (CMIN3), from buy to “hold”, following with a target price of R$6 – which represents a potential drop of around 5%.
For the brokerage's analysts, the valuation of the paper has stretched too far in recent weeks, pushed mainly by “a kind of short squeeze“, promoted by the share buyback program, combined with the lack of liquidity.
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Furthermore, they cite pessimism about the Chinese economy. “The macro scenario does not make us comfortable to make price assumptions more elastic (quite the opposite),” they said.
Genial uses US$98/t for the price reference. iron ore 62% Fe in 3Q24E and US$95/t in 4Q24E. “It is possible that if the price of commodity continues at this depreciated level, we will revisit our projection downwards for the end of 2024 and for 2025, which is at an average of US$99/t 25E”.
What matters in China's economy
Genial highlights that China's retail sales fell below expectations, cites a deflationary scenario and says it has cut its GDP forecast for 2024 and 2025 to 4,5% (vs. 4.8% previously) and 4,2% (vs. 4.6% previously), respectively.
“The crucial difference in our new estimates vs. the old ones is in the risk level gauge in relation to the support we were seeing for the strong export numbers within the trade balance,” he said.
The brokerage also said it believes the new round of easing for non-resident properties will be “as inefficient as the last ones” and highlights that there are 48 million pre-sold homes that have not yet been built.
“The non-completion rate increased dramatically to 47% on average between 2015 and 2023 vs. 17% before 2015, coinciding with the beginning of the inversion of the age pyramid (called the demographic crisis),” he said.
In the first half of this year, eight out of 10 private developers in China saw sales declines of more than -25% year-on-year, the brokerage firm also points out.