[Click eStock] POSCO, Product Price Increase Effect... Profit Improvement Trend Expected to Continue

[Asia Economy Reporter Oh Ju-yeon] NH Investment & Securities maintained a 'Buy' rating on POSCO, stating that profit improvement will continue due to product price increases, and raised the target price from KRW 325,000 to KRW 350,000.

According to NH Investment & Securities on the 15th, POSCO's consolidated sales for Q4 2020 are estimated at KRW 14.8435 trillion, a 7.5% decrease compared to the same period last year, while operating profit is expected to increase by 51.9% to KRW 846.9 billion. Net income attributable to controlling shareholders is projected to rise by 981.0% to KRW 547.7 billion.

Researcher Byun Jong-man analyzed, "These estimated sales and operating profit figures align with market consensus, and net income attributable to controlling shareholders exceeds it by 9.6%."

The earnings growth is attributed to improved domestic and international steel segment performance driven by an increase in the average selling price (ASP) of steel products. Despite the strong Korean won and rising raw material costs, the carbon steel ASP rose by approximately KRW 45,000 compared to the previous quarter, leading to profit growth.

For this year, consolidated sales are expected to increase by 5.6% year-on-year to KRW 60.6127 trillion, and operating profit is forecasted to grow by 56.5% to KRW 3.7361 trillion.

On a separate basis, the ASP of carbon steel is expected to rise from KRW 634,000 per ton in Q3 2020 as a bottom to KRW 680,000 in Q4 and KRW 720,000 in the first half of 2021.

Researcher Byun stated, "The rise in product prices will drive increases in sales and profits," and added, "The performance of consolidated subsidiaries, which are highly sensitive to economic conditions, is also expected to improve simultaneously." He further said, "The increased raw material cost burden due to strong iron ore prices can be passed on to prices thanks to economic recovery and robust demand in downstream industries, and we raise the EPS (earnings per share) forecasts for 2021 and 2022 by 10.8% and 5.8%, respectively."