[Click eStock] “Pungsan, Must Consider Increased Copper Price Volatility”

Samsung Securities Report

[Asia Economy Reporter Minji Lee] Samsung Securities maintained a buy rating and a target price of 49,000 KRW for Poongsan on the 5th.

On a consolidated basis for the third quarter, sales and operating profit are estimated to have recorded 872.6 billion KRW and 7 billion KRW, down 5.5% and 37.1% respectively from the previous quarter. Operating profit is expected to meet market expectations. After a sharp rise in copper prices in the first half of the year, the market entered a stabilization phase in the third quarter. The average copper price remained at a level similar to the previous quarter, suggesting that the profit margin of the non-ferrous metal business likely normalized downward.

Defense exports are expected to maintain solid performance based on stable export flows to the United States. Unless there are special issues, exports to the U.S. are estimated to remain at current levels in the fourth quarter as well.

Copper prices are analyzed to show high volatility due to increased economic uncertainty. In the first half of this year, copper showed strength based on high liquidity, a weak dollar, supply disruptions at South American mines due to the spread of COVID-19, and tight logistics conditions. However, recently, concerns about an economic slowdown in China, the largest copper consumer, and U.S. tapering issues have increased uncertainty regarding copper prices. Recent intensification of power shortages in China has further heightened concerns about copper demand.

Researcher Jaeseung Baek of Samsung Securities stated, “However, as power shortages worsen, production restrictions are being imposed first on metal smelting plants that consume the most electricity, so despite concerns about demand, copper supply and demand itself do not seem to have been significantly damaged yet,” and analyzed, “This can be understood by the fact that copper prices have not undergone significant adjustments unlike the recent correction in the company’s stock price.”

Researcher Baek added, “Although uncertainty in copper prices has increased, due to the nature of the company’s business model, high profit margins are sustained when the price direction continuously trends upward rather than the price level itself. At this point, it is necessary to respond in a trading manner until that direction becomes clear.”