[Click eStock] "Hyundai Steel, Profitability Expected Through Structural Improvement"

SK Securities Presents Investment Opinion 'Buy' and Target Price of 33,000 Won... Closing Price on 27th at 25,000 Won

[Asia Economy Reporter Kum Boryeong] An analysis has been raised that profitability improvement is also expected through the structural improvement of Hyundai Steel.

According to SK Securities on the 28th, Hyundai Steel's consolidated performance in the fourth quarter of last year recorded sales of 4.8218 trillion KRW and an operating loss of 147.9 billion KRW. Compared to the previous year, sales decreased by 9.2%, and operating profit turned to a loss. On a separate basis, sales were 4.1203 trillion KRW, and operating loss was 142.7 billion KRW, falling short of market expectations.

SK Securities researcher Kwon Soon-woo explained, "On a separate basis, the decline in automobile steel sheet sales caused a mix deterioration, one-time costs were reflected, and the spread of hot-rolled steel and plate products worsened, negatively affecting both scale and profitability. The overseas sector also showed an operating loss as sales at the China subsidiary continued to slump."

SK Securities expects Hyundai Steel's consolidated operating profit this year to be 458 billion KRW, an estimate 38.3% higher than the previous year. Sales are expected to decrease by 2.5% to 20 trillion KRW. The increase in automobile steel sheets due to the recovery of Hyundai Motor Group's sales, improvement in profitability of overseas subsidiaries, and spread expansion are expected to act as positive factors. However, demand sluggishness due to the novel coronavirus infection (COVID-19) and increased inventory in China are likely to be burdens on the stock price for the time being.

This year, full-scale structural improvement is also expected. Researcher Kwon said, "It is necessary to pay attention to whether profitability improves in the mid to long term. By product, automobile steel sheets are gradually increasing the proportion of non-captive customers, and the expansion of high-profit new steel types and premium products is underway. Also, the strengthening of ESG (Environmental, Social Responsibility, Governance) capabilities, which are becoming increasingly important, is a mid- to long-term investment point. Additionally, the physical division of the casting and forging business units announced this month and the expected additional business rationalization process are also positive."

SK Securities gave Hyundai Steel a 'Buy' investment opinion with a target price of 33,000 KRW. The closing price on the 27th was 25,000 KRW.