[Click eStock] "Pungsan, Copper Price Increase as Stock Price Rise Momentum"

NH Investment & Securities

[Asia Economy Reporter Song Hwajeong] NH Investment & Securities on the 22nd raised the target price for Poongsan from 36,000 KRW to 43,000 KRW, viewing the rise in copper prices as a strong momentum for stock price increase. The investment opinion was maintained as 'Buy.'

Byun Jongman, a researcher at NH Investment & Securities, explained, "The target price was raised reflecting the rise in copper prices," adding, "The new target price corresponds to a price-to-book ratio (PBR) of 0.8 based on the expected 2021 earnings, with consolidated operating profit for 2021 expected to reach 158.1 billion KRW, a 30.4% increase compared to the same period last year." He analyzed that copper prices approaching 9,000 USD per ton will drive profit growth in the non-ferrous metal business and stock price increase.

It is expected that favorable performance will continue in the first half of this year. Researcher Byun said, "The average copper price for this year was raised by 10.9% to 8,758 USD, a 41.8% increase compared to the previous year, and the earnings per share (EPS) forecast for this year was also raised by 14.3%," adding, "Operating profit for this year is expected to turn positive in the first quarter at 34.4 billion KRW compared to the same period last year and continue favorable performance with a 116% increase to 45.4 billion KRW in the second quarter."

Despite Poongsan's conservative guidance, copper prices are expected to be a strong momentum for stock price increase. Poongsan presented a separate basis performance guidance for 2021 with sales of 2.2237 trillion KRW and operating profit of 109.4 billion KRW. These figures represent increases of 14.4% and 39.6% respectively compared to the previous year but are lower than market consensus. Researcher Byun said, "This appears to be a conservative plan based on an assumption of copper prices at 7,500 USD per ton in 2021," adding, "Despite the low guidance, the stock price will respond to copper prices and rise."