[Click eStock] "Hyundai Steel to Achieve Significant Performance Improvement Starting Q4"

Yuanta Securities Issues 'Buy' Investment Opinion and Sets Target Price at 35,000 Won... Closing Price on 21st at 24,850 Won

[Asia Economy Reporter Kum Boryeong] An analysis suggests that Hyundai Steel's substantial earnings improvement will begin in the fourth quarter.

According to Yuanta Securities on the 22nd, Hyundai Steel's third-quarter earnings are estimated at an operating profit of 20.5 billion KRW on a consolidated basis and 11.9 billion KRW on a separate basis. This represents a decline of 40% and 65% respectively compared to the previous year.

Researcher Lee Hyunsoo of Yuanta Securities stated, "On a consolidated basis, overseas subsidiaries that recorded operating losses in the second quarter due to the impact of COVID-19 are believed to have turned profitable in the third quarter due to a recovery in sales volume compared to the previous quarter. On a separate basis, total sales volume is estimated to increase by 5% from the previous quarter to 4.89 million tons. Although long products are expected to slightly decrease due to seasonal off-season effects, sales volume of flat products is expected to increase by 8% driven by the recovery of operating rates in downstream industries (automobiles), leading to an overall increase in total sales volume," he explained.

Flat products were identified as the key driver for future earnings improvement. The researcher added, "Since the second quarter, iron ore prices have risen, and coking coal prices have also rebounded since September. While price increases for hot-rolled, cold-rolled (excluding automobiles), and thick plate products are being implemented in both domestic and export markets, automobile steel sheet prices have not increased, so the price increase for flat products in the fourth quarter is expected to be relatively smaller compared to domestic competitors. Nevertheless, in the fourth quarter, long products are expected to enter the seasonal peak again, expanding sales volume, and flat products are anticipated to see both sales volume growth and spread expansion, making further operating profit improvement possible," he said.

Although COVID-19 has affected the operation of some group-affiliated automobile factories, overall factory operating rates have significantly increased compared to the second quarter. The researcher analyzed, "While modest earnings improvement is expected through the third quarter, the speed and magnitude of earnings improvement could increase from the fourth quarter onward."

Yuanta Securities has given Hyundai Steel a 'Buy' rating with a target price of 35,000 KRW. The closing price on the 21st was 24,850 KRW.