[Click eStock] "Pungsan, Copper Price Uptrend... Continued Earnings Improvement Expected"

Hana Financial Investment Report

[Asia Economy Reporter Minji Lee] Hana Financial Investment maintained a buy rating and a target price of 51,000 KRW for Pungsan on the 30th. This is based on the expectation that the company will continue its performance improvement in the second half of the year due to the rebound in copper prices.

In the second quarter, Pungsan's standalone sales and operating profit were 669.9 billion KRW and 80.7 billion KRW, respectively, representing increases of 46.8% and 356.5% compared to the same period last year. The operating profit significantly exceeded the market estimate of 55.6 billion KRW. The recovery in domestic and overseas home appliance and automobile sales led to a 19.7% increase in the sales volume of non-ferrous metals to 49,000 tons compared to a year ago, and a profit of 29 billion KRW was generated due to the rise in LME copper prices. Along with the normalization of the defense domestic market, which was sluggish in the first quarter, a substantial increase in defense exports resulted in total defense sales of 198.5 billion KRW, up 21.5% year-on-year.

The rise in copper prices also led to a profit of approximately 10 billion KRW for the subsidiary PMX, improving profitability, and consolidated operating profit grew 406.7% year-on-year to 106.5 billion KRW. This figure significantly surpassed the market expectation of 81.6 billion KRW.

Currently, the LME copper price is at 9,709 USD per ton. Although it turned bearish until mid-last month, it appears to have successfully rebounded. On the supply side, limited investment in new copper mines over the past few years and production disruptions in major copper ore producing regions such as Chile have affected output. Although the spot smelting charge (T/C) for Chinese copper concentrate has slightly rebounded since May, it remains low at 52.5 USD per ton.

Researcher Seongbong Park of Hana Financial Investment said, "The benchmark smelting charge for copper concentrate also settled at a level 7.6% lower, so the possibility of a sharp increase in smelter operating rates is limited," adding, "Global copper demand, including China, is expected to remain favorable throughout the third quarter."

Researcher Park explained, "Despite the expected significant performance improvement this year due to rising copper prices and increased defense exports to the U.S., the current price-to-book ratio (PBR) is undervalued at 0.64 times."