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SMC - Steel price surge to boost H2 2017 earning - Company Report

We expect revenues to rise 34.3% in 2017, driven by a 41% surge in steel prices since May. 38.4% 2017F EPS decline is due to: 1) 30% dilution from a VND225 billion (USD10 million) private placement in May 2017; and 2) normalization from GPM high of 7.7% in Q2 2016. 6.0% 2017F GPM is well above historical levels of 3.0% – 4.0% due to rising steel prices. Private placement proceeds were used to launch a new galvanizing line as the company expands into steel processing to boost margins and