Pungsan Smiles at Increased US Ammunition Exports

[Asia Economy Reporter Eunmo Koo] Poongsan is raising expectations for improved profitability due to expanded ammunition exports to the U.S. market and rising copper prices.

According to the Korea Exchange on the 18th, Poongsan's stock price closed at 25,500 KRW, up 1.59% (400 KRW) from the previous trading day, continuing a four-day consecutive rise. Poongsan's stock price has risen 10.2% this month, and Poongsan Holdings also increased by 6.9%, outperforming the KOSPI's 3.4% rise during the same period.

The stock price increase is interpreted as being driven by expectations of expanded defense sector exports centered on the North American market in the second half of the year. The enthusiasm for firearm purchases in the U.S., which began in the first half of this year, is expected to continue into the second half, impacting Poongsan's ammunition exports. According to the U.S. Federal Bureau of Investigation (FBI), the number of background checks for firearm purchases in the U.S. in August reached 3.11 million, a 31.6% increase compared to the same period last year, indicating sustained demand for firearms.

Despite the slowdown in the spread of COVID-19, which fueled the increase in U.S. firearm purchases in the first half, the reason the upward trend in firearm purchases is expected to continue in the second half is due to the rise of Democratic presidential candidate Joe Biden. As Biden's approval ratings increase, firearm purchases are also expected to rise.

Jung Haneul, a researcher at Korea Investment & Securities, stated, "Biden was a leading figure advocating for comprehensive gun control during the Obama administration," adding, "As Biden's support rises, a scenario similar to the second half of 2016, when gun hoarding occurred following Hillary Clinton's rise in the Democratic presidential race, could be repeated." He also estimated that South Korea's ammunition exports to the U.S. in the third quarter, based on provisional export-import data released by the Korea Trade Statistics Promotion Institute (TRASS), could reach 2.6 times that of the second quarter.

The rise in copper prices is also positive, as it is expected to improve profitability in the non-ferrous metal sector. According to the London Metal Exchange (LME), copper prices reached $6,814 per ton on the 15th, marking the highest level in the past 26 months. Hong Seongwoo, a researcher at KB Securities, explained, "The gradual recovery in demand for refined copper during the economic recovery phase is expected to lead to a rebound in the non-ferrous metal sector's performance," adding, "Copper prices are rising due to China's economic recovery and tight supply of concentrates caused by the spread of COVID-19 in the Southern Hemisphere."

Poongsan is expected to continue its performance improvement by recording strong results in the third quarter, supported by expanded U.S. ammunition exports in the defense sector and improved profitability in the non-ferrous metal sector. According to financial information provider FnGuide, Poongsan's operating profit for the third quarter of this year is estimated at 39.3 billion KRW, an increase of 19,535% compared to the same period last year due to the base effect. Sales during the same period are also expected to increase by 15.9% to 653.4 billion KRW.