The Best Chinese Steel Companies

While some investors are still cautious about Chinese public company stocks, others recognize that the last several years have represented a rare buying opportunity to purchase the stocks of select companies that are delivering on the hyper-growth promised when the waves of Chinese companies were originally entering the U.S. public markets. The public companies in the steel industry in China represent a snapshot of what has been occurring in that economy, and how certain management teams have navigated the challenges. While the companies below are all in the steel business, they operate in different parts of the steel chain. It is possible to see which ones are delivering on the key metric of sales growth.

General Steel Holdings, Inc. (NYSE:GSI) is the best performer from a revenue growth standpoint. Headquartered in Beijing, GSI produces a variety of steel products including rebar, high-speed wire and spiral-weld pipe, and has operations in the Shaanxi and Guangdong provinces, the Inner Mongolia Autonomous Region, and the Tianjin municipality. Since FY 2007 through the Last Twelve Months (LTM) as of June 30, 2014, GSI has grown their sales from $1.35 Billion to $2.34 Billion, a growth of 73%. The Company is also currently exploring going into higher margins products along the steel production chain. Earlier this month, on August 15, 2014, GSI announced the signing of a memorandum-of-understanding with the Tewoo Group, a diversified state-owned enterprise that operates businesses in commodity trade, logistics, real estate development, financial services (ranked 51st on the China List of Top 100 Enterprises and 185th on the Fortune Global 500 List) to co-develop bulk commodity e-commerce business. This new business joint venture could prove to be quite interesting, and is related to their existing core business and would build upon GSI's strengths. While their debt levels are a bit high, their operating performance has recently surged, with the company reporting for Q2 2014, gross margins at a 36-month high of 4.8% and earned positive EBITDA of $33.6 million, an improvement of $54.4 million from the same period of a year ago. The Chairman and CEO also telegraphed to the market that he is a believer by leading a financing round of $7.5M earlier this year.

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The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. ...

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Harry Goldstein 5 years ago Member's comment

Would love to read anything more current you may have on Chinese companies.