Goldman Laments: ‘We Missed the Rally’ in Brazil's Top Stock

(Bloomberg) -- Goldman Sachs issued a mea culpa for missing out on a rally in a Latin American steelmaker whose shares are the best-performing stock in Brazil this year.

Since Goldman began research coverage of steelmaker CSN -- or Companhia Siderurgica Nacional SA, as it’s formally known -- with a sell rating in mid-December, the stock is up 78 percent through Friday, versus a nearly 6 percent increase in the Ibovespa.

"We acknowledge that we missed the rally as we did not expect improved operational data and underestimated the impact of higher iron ore prices," analysts Thiago Ojea and Lucas Canteras wrote in a report dated April 14.

Goldman is now upgrading the stock, rating it a neutral, and raising its price target to 15.30 reais from 9.30, incorporating higher iron ore and steel prices. Goldman also boosted its estimates for 2019, 2020 and 2021 by 26 percent, 6 percent and 5 percent, respectively.

The investment bank expects CSN’s positive earnings dynamics to continue in the first quarter of the year and sees realized steel prices improving 9 percent this year, with the potential for even further upside to prices.

Analysts have been citing a more favorable scenario for CSN on the back of increased prices, as a fatal dam collapse in Brazil hurt Vale SA’s production and as Australian miners also flagged lower output after a cyclone. CSN’s Chief Executive Officer Benjamin Steinbruch told Bloomberg in early April that asset sales will continue and that the firm’s net debt to Ebitda ratio will fall to 2.5 times this year.

To contact the reporter on this story: Vinícius Andrade in São Paulo at vandrade3@bloomberg.net

To contact the editors responsible for this story: Courtney Dentch at cdentch1@bloomberg.net, Will Daley, Scott Schnipper

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