ROSEVILLE, Calif., Apr. 18, 2008 (Business Wire) -- Dutton Associates updates its coverage of General Steel Holdings (NYSE: GSI) with a Strong Speculative Buy rating and a price target of $10.80. The 12-page report by Dutton senior analyst Stanley Ng is available at www.jmdutton.com as well as from First Call, Bloomberg, Zacks, Reuters, Knobias, and other leading financial portals.
General Steel Holdings recently announced a set of very solid financial results for the 4Q and FY2007, with the full year revenue of $772.4 million against $139.5 million a year ago. Net income for 2007 surged to $22.4 million. Even though revenue declined 22.4% in the 4Q07 to $268.2 million from $345.4 million in 3Q07, it was mainly due to the seasonal factor and the elimination of revenue from selling steel products for other companies at Longmen Joint Venture (Longmen JV). We are happy to see margin improvement in 4Q07, which will be extended into 2008. The solid financial results in 2007 clearly indicated that management's strategy of expanding steel production capacity through the acquisition and implementation of western management to improve operating efficiency has been successful. Based on our revised assumptions, we expect General Steel to achieve 70% in revenue growth to $1,311.3 million and a 75% increase in net income to $39.3 million in 2008. Completion of the acquisition of additional steel production capacity this year would further stimulate growth in both 2008 and 2009. At our new 12-month price target of $10.80 per share, the stock would trade at a prospective 2008 PE of 9.9 times, which is at par to the average 2008 PE of its Chinese peers. With significant upside potential ahead, we upgrade our rating to Strong Speculative Buy from Speculative Buy on the stock.
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