Pungsan Smiles as Copper Prices Rise... Earnings Momentum Continues

[Asia Economy Reporter Song Hwajeong] As copper prices rise, Pungsan's performance is improving. Future stock prices are expected to move depending on whether the copper price's upward cycle continues.

Pungsan recorded consolidated sales of 725.2 billion KRW and operating profit of 62.4 billion KRW in the first quarter of this year. Sales increased by 24.8% compared to the same period last year, and operating profit turned positive. Lee Jonghyung, a researcher at Kiwoom Securities, analyzed, "Thanks to the rise in copper prices, the first quarter operating profit reached the highest level in four years since the first quarter of 2017 (81.7 billion KRW), significantly exceeding the market consensus of 44.8 billion KRW. Despite defense sales decreasing by 27% compared to the same period last year, hitting the lowest in 12 years and showing weakness, the profitability improvement in the non-ferrous metal business was greater than expected due to the sharp rise in copper prices."

Copper prices surpassed $10,000, soaring to the highest level in 10 years. On the 29th of last month (local time), copper prices closed at $10,008 per ton on the London Metal Exchange (LME), reaching the highest level since February 2011 ($10,190). Copper prices have risen nearly 30% this year alone and more than doubled compared to the March low.

As copper prices continue to rise, Pungsan's performance improvement is expected to be more prominent in the second quarter. Baek Jaeseung, a researcher at Samsung Securities, said, "Based on a weak dollar and tight supply and demand, copper prices will continue to rise in the second quarter. Accordingly, Pungsan's second-quarter performance will increase further compared to the previous quarter." He analyzed that the environment is favorable for copper price increases due to demand recovery, supply disruptions in South American mines, increased liquidity, and growing eco-friendly demand such as electric vehicles. Baek explained, "Considering that the current environment is more favorable compared to when the all-time high was recorded in 2011, copper prices will surpass historical highs."

Future stock prices are expected to move depending on how long the copper price's upward cycle lasts. The researcher said, "Since Pungsan's non-ferrous metal business margin is influenced by the direction of copper prices, as long as the copper price rise continues, the performance of the non-ferrous metal business at the headquarters and subsidiaries will continue to improve. Future stock prices depend on how long the copper price's upward cycle lasts." Kiwoom Securities raised its operating profit and controlling shareholder net income forecasts for this year by 30% and 38%, respectively, reflecting the first-quarter results and recent copper price increases. The target stock price was also raised from 44,000 KRW to 48,000 KRW.