[Click eStock] Poongsan, Weakening Uptrend in Copper Prices and Stable Defense Sales

[Asia Economy Reporter Lee Seon-ae] Yuanta Securities announced on the 8th that it maintains its investment opinion of 'Buy' on Pungsan and a target price of 39,000 KRW.

The main variables affecting Pungsan's operating performance (such as sales and operating profit) include 1) copper prices, 2) refined copper sales volume, and 3) defense sales revenue. Due to the impact of COVID-19 in March 2020, copper prices fell below $5,000 per ton but rebounded after April, showing strength throughout the second half of 2020 and continuing a strong trend into the first quarter of 2021, exceeding $9,000. The factors behind this year-long copper price rally include ① a weak dollar, ② abundant liquidity, ③ global economic recovery, and ④ supply concerns.

As of April 2021, global economic recovery and supply concerns still persist, and liquidity remains abundant, but expectations for further liquidity expansion compared to the previous year are low. Additionally, the dollar's strength since January is considered a burden on the overall non-ferrous metal market, including copper. Although copper prices, which rose rapidly over the past year, still have upward factors, a decline is not expected; however, the pace of increase may slow due to the impact of the strong dollar.

Researcher Hyunsoo Lee of Yuanta Securities stated, "Based on the recovery in refined copper sales volume and solid defense sales revenue, separate and consolidated operating profits for 2021 are expected to increase by +46% and +55% year-on-year, respectively. However, the possibility of a weakening copper price uptrend is not favorable in terms of performance and momentum." He added, "Moreover, since the number of new COVID-19 cases is rising in Chile and Peru, the major copper concentrate exporting countries, if this situation prolongs, there is a possibility of copper supply disruptions exceeding our expectations, which should also be kept in mind."