Pungsan Anticipates Best Performance in 10 Quarters... Stock Price Gains Momentum

[Asia Economy Reporter Koh Hyung-kwang] Pungsan's stock price is gaining momentum amid expectations of an earnings surprise in the third quarter of this year. Due to the dual positive factors of rising copper prices and increased exports in the defense sector, it is forecasted to achieve the highest performance in the last 10 quarters.

According to the Korea Exchange on the 22nd, as of 9:40 a.m., Pungsan was trading at 27,500 KRW on the KOSPI market, up 1.8% from the previous trading day. It reached a 52-week high, rising 15.5% just this month. Compared to the stock price on June 22, four months ago (21,300 KRW), the increase rate is 29.1%.

The recent upward trend is interpreted as reflecting expectations for improved earnings. It is anticipated that Pungsan's operating profit in the third quarter of this year will reach the highest level in the last 10 quarters. The securities industry expects Pungsan's consolidated operating profit for the third quarter to be around 42 billion to 50 billion KRW. This is more than double the previous quarter's 21 billion KRW. Consolidated sales are also expected to increase by about 12% from the previous quarter, reaching 650 billion KRW.

This is analyzed to be due to the rise in international copper prices and the accelerated demand for firearms and ammunition purchases in the U.S. starting from the first half of this year. Pungsan, which operates in the refined copper business (copper refined for use in electrical wires and cables), benefits from rising copper prices as the accumulated inventory valuation gains increase, which are then reflected in operating profit, leading to improved performance. Researcher Baek Jae-seung of Samsung Securities stated, "If South American mining companies normalize production, it may temporarily increase copper price volatility, but considering fiscal policies of various countries for economic recovery, the solid trend of copper prices is likely to continue."

The significant increase in ammunition demand within the U.S. following protests over the death of George Floyd has also raised expectations for performance. Especially with the upcoming U.S. presidential election, the demand for firearms and ammunition is surging further as Democratic candidate Joe Biden, who has pledged gun control regulations, continues to gain support.

Thanks to this, Pungsan's defense sector sales are also rapidly increasing. In the second quarter, exports centered on the U.S. doubled year-on-year to 67.4 billion KRW, driving performance improvement, and securities firms forecast this trend will expand further in the third quarter. Researcher Bang Min-jin of Eugene Investment & Securities said, "Ahead of the U.S. presidential election, concerns over gun regulations are leading to inventory buildup, which will increase defense exports," adding, "Strong defense export performance is expected to continue following the previous quarter."