[Click eStock] "POSCO, Profitability Improves Due to Soaring Iron Ore Prices"

[Asia Economy Reporter Ji Yeon-jin] Shinhan Financial Investment maintained its buy rating on POSCO and raised the target price to 340,000 KRW on the 21st. Strong earnings continue, and profitability is expected to improve due to the sharp rise in iron ore prices.

The company's Q4 consolidated earnings are expected to show sales of 15.6 trillion KRW, down 2.8% year-on-year, but operating profit is expected to increase by 29.1% to 719.9 billion KRW.

Sales are steady, but operating profit is forecasted to slightly miss consensus. This reflects the impact of raw material price surges outpacing price increases.

The total expected product sales volume is 9.09 million tons, an increase of about 100,000 tons compared to the previous quarter. With the sharp rise in iron ore prices, the raw material input cost per ton is expected to increase by 12,000 KRW compared to the previous quarter. However, the ASP of carbon steel rose by 26,000 KRW, resulting in an expected spread improvement of 14,000 KRW per ton.

The annual expected performance for this year is sales of 65.5 trillion KRW and operating profit of 4.3 trillion KRW. Hyunwook Kim, Senior Researcher at Shinhan Financial Investment, said, "Iron ore prices, which were in the low 80 dollars last May, have more than doubled to 173 dollars now, and with front-end demand remaining steady, the rise in raw material prices facilitates price increases," adding "the current stock price is at a PBR (price-to-book ratio) of 0.51 times based on this year, indicating sufficient room for growth."