Zacks Investment Research downgraded shares of Companhia Siderurgica Nacional (SID) from OUTPERFORM to NEUTRAL on December 27, 2013, with a target price of $6.50.
Over the long-term, CSN is well positioned to leverage benefits from the rising infrastructural demand in the domestic and international markets. The World Steel Association predicts global steel consumption to grow 3.3% in 2014. Instabilities in the U.S. and the Eurozone are abating while China has recently shown signs of expansion, favoring CSN s growth prospects. Also, the company made investments to improve its steel production capacity. Besides steel, CSN's exposure to iron ore mining, cement, and infrastructure projects are positive drivers. However, we believe certain near-term risks from rising cost of sales, growing competition and exchange rate fluctuations will restrict the company's growth momentum. In the third-quarter 2013, cost of sales increased 15.1% year over year while long-term debt stood at R$27.8 billion. Further hikes in costs and debt will prove detrimental for the company's growth. Considering the above, we have downgraded CSN from Outperform to Neutral.
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