[Click eStock] "Korea Steel, Strong Performance Even in Off-Season"

Sales Recovery Expected in Q4 This Year
Hana Financial Investment "Maintains Target Price of 14,000 KRW for Hanguk Steel"

[Image source=Yonhap News]

[Asia Economy Reporter Gong Byung-sun] Korea Steel is expected to maintain high profitability even in the third quarter of this year, which is classified as an off-season. In the fourth quarter of this year, entering the peak season, a steep growth trend is anticipated.

On the 19th, Hana Financial Investment estimated Korea Steel's third-quarter sales to be 255.4 billion KRW, a 72% increase compared to the same period last year, and operating profit to be 32.4 billion KRW, a 265.1% increase over the same period. These figures align with the market consensus of 234.5 billion KRW and 32.3 billion KRW, respectively.

The increased rebar prices are interpreted to have positively impacted the third-quarter performance. Typically, the third quarter is considered an off-season due to it being summer and the reduced working days caused by the Chuseok holiday in September. In fact, Korea Steel's third-quarter rebar sales volume decreased by 10.6% compared to the previous quarter, totaling 242,000 tons.

Nevertheless, the domestic raw steel (steel scrap) price rose by 113,000 KRW per ton compared to the previous quarter, offsetting the decreased sales volume. Additionally, as the announced and distribution prices of rebar increased, the selling price is expected to rise by 175,000 KRW per ton.

(Provided by Hana Financial Investment)

Sales volume is also expected to recover in the fourth quarter of this year. Demand for construction this year is strong, and the peak season of the fourth quarter has begun. Furthermore, since the Chuseok holiday was in September this year, the number of working days also increased. Accordingly, Hana Financial Investment forecasted Korea Steel's fourth-quarter sales volume to increase by 13.4% year-on-year to 267,000 tons.

Rebar distribution prices are expected to remain firm. Seongbong Park, a researcher at Hana Financial Investment, explained, “Recently, with the sharp rise in coking coal prices and maritime freight, global raw steel prices are expected to increase,” adding, “Electricity price hikes in China are also anticipated, raising the possibility of increased export prices for rebar.”

Therefore, Hana Financial Investment maintained its investment opinion of ‘Buy’ on Korea Steel, with a target price of 14,000 KRW. The closing price on the previous day was 9,650 KRW.