[Click eStock] "POSCO, Q3 'Earnings Surprise'... Stock Price Expected to Rise"

[Asia Economy Reporter Oh Ju-yeon] Kiwoom Securities analyzed that POSCO recorded an 'earnings surprise' in the third quarter of this year due to a turnaround in its steel business, showing a rapid recovery in profit resilience.

According to Kiwoom Securities on the 26th, POSCO's consolidated operating profit for the third quarter was 666.7 billion KRW, significantly exceeding Kiwoom Securities' estimate of 531.1 billion KRW and the consensus of 478.3 billion KRW. The separate operating profit was 261.9 billion KRW, surpassing Kiwoom Securities' estimate of 210.4 billion KRW and the consensus of 222.6 billion KRW, successfully turning positive from a loss of 108.5 billion KRW in the second quarter.

Researcher Lee Jong-hyung explained, "The crude steel production volume normalized to 94.98 million tons, reaching pre-COVID-19 levels, resulting in a greater-than-expected fixed cost reduction effect. Although the average selling price (ASP) declined, input costs, mainly coal, decreased, expanding the product-to-raw material spread."

Lee also evaluated, "The sum of operating profits of consolidated subsidiaries, calculated by subtracting separate operating profit from consolidated operating profit, also normalized to 404.8 billion KRW. Supported by the recovery of the steel market from the second quarter bottom, most steel subsidiaries, including the Indonesian steel mill and the Indian cold rolling plant, led performance improvements compared to the previous quarter. Non-steel subsidiaries also showed mostly stable results, except for POSCO International, which had regular maintenance at the Myanmar gas field."

Operating profit for the fourth quarter is expected to increase by 26% year-on-year to 704.1 billion KRW.

Researcher Lee diagnosed, "The improvement in operating profit is expected to continue due to product price increases and sales volume growth."

However, due to the seasonal low of POSCO Energy and the traditional increase in fourth-quarter expenses of some subsidiaries, the combined operating profit of consolidated subsidiaries may temporarily slow to 352.4 billion KRW compared to the third quarter.

Nevertheless, the POSCO stock price is expected to rise along with Chinese steel prices in the future. Kiwoom Securities maintains a 'Buy' investment rating and raised the target price by 15% from the previous level to 300,000 KRW.