[Click eStock] "Ssangyong C&E, Only Good Things Left for the Second Half"

[Asia Economy Reporter Park Jihwan] Shin Young Securities evaluated Ssangyong C&E on the 4th, stating that although there was a temporary slowdown in the second quarter performance, only improvements remain for the second half of the year. They maintained a 'Buy' investment rating and a target price of 10,000 KRW.

Researcher Park Sera of Shin Young Securities said, "Ssangyong Cement's second quarter sales and operating profit recorded 416.1 billion KRW and 79.3 billion KRW, up 8.0% and down 12.7% year-on-year, respectively." Last year's second quarter saw a base effect due to a 23 billion KRW profit from the sale of carbon emission rights.

Excluding the carbon emission rights profit, the gross profit margin is estimated to have improved by 2.2 percentage points compared to the same period last year. It is notable that the cost ratio is continuously improving due to increased processing fee income from the operation of the resource recycling facility and an increase in the alternative fuel ratio, which has reduced the use of thermal coal.

The effects of shipment volume and price increases in the second half are also expected. Researcher Park Sera said, "The shipment volume in the first half of this year was 6.75 million tons, an increase of 5.4% compared to the previous year," adding, "Due to the impact of COVID-19, export volumes have shown increased quarterly volatility, and a significant rebound within the year seems difficult." However, domestic shipment volume maintains a steady upward trend, and cement shipments delayed by variables such as the heatwave and ready-mix concrete strike in the second quarter are expected to recover from the end of this month after the off-season."

Researcher Park Sera emphasized, "The progress rate of domestic construction projects has recently been somewhat delayed, so demand for building materials to compensate for this is expected to concentrate in the fourth quarter," adding, "In particular, the shipment volume in the fourth quarter is expected to increase significantly." Furthermore, shipments are proceeding normally at the recently increased price of 3,800 KRW per ton from last month, which is expected to add to the price increase effect.

Researcher Park said, "The import price of thermal coal has been continuously rising recently, increasing the overall cost burden on the cement industry," but emphasized, "However, aiming to achieve a 60% recycling resource substitution rate by next year, differentiated results in terms of profitability can be expected, which is noteworthy."