2023-10-05 12:24:48
In September, we analyzed where to look for entry points for Severstal shares. Since then, the security has risen in price. What to do now with the steelmaker’s shares.
General view
• The Moscow Exchange index has rebounded from the area of 3000 points and has not yet achieved sustainable growth. The market may remain at the achieved levels for some time. Severstal shares do not always keep up with the market, but in general there is also a wide range of fluctuations in the horizontal corridor.
• Market participants are waiting for the steelmaker to resume dividend payments, which might be very attractive given the accumulated cash. The paper is fundamentally strong and is among the favorites of BCS analysts. Details >>
• At the same time, there are some nuances in the short-term technical picture.
What to do with Severstal shares
Long term. In September, it was assumed that the bottom of the correction might be in the region of 1200–1230. The price did not reach this zone quite a bit, turning around from 1258. Long-term investors can hold the paper following buying it on the drawdown with the prospect of updating the highs and further growth. If the correction does become deeper, investors will have even more attractive levels to build up positions.
Short term. For day traders who are looking to earn more by using more active trading, margin trading, shorting, the situation is now very interesting in the options:
• There are signs of the formation of a Head and Shoulders reversal pattern with the neck line in the area of 1250–1260. But while there are no reasons for its implementation, it is important to continue the movement to 1400 and update the highs, taking into account the strengths of the paper.
• A breakout of the 1350 level will be a signal to move to the neck line. A rebound and a new wave of sideways growth are possible from it. And only if it consolidates below 1250–1260 will it be possible to talk regarding the prospects for a further decline to 1100.
• When working out these scenarios in short-term trading, it is recommended use stop loss. Read more regarding how to use stop losses. here>>
The most important things regarding Severstal
• Target of BCS World of Investment analysts for the year: 2100 rub. / +54%. Recommendation “Buy».
• Strong domestic demand for steel and a weaker ruble provide support.
• Severstal noted that the level of production capacity utilization is close to the maximum. Against this background, EBITDA margin turned out to be higher than historical levels.
• Export duties. We do not expect a noticeable effect on Severstal, since the company is currently represented on the domestic market.
• At the end of August, Severstal released financial results under IFRS. The financial disclosure might be a good signal for the resumption of dividends in the medium term. The company’s net cash position at the end of the first half of 2023 is 14% of the market capitalization and implies potential dividends with double-digit yields in the medium term.
BCS World of Investments
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