[Click eStock] "SeAH Besteel, Sales Volume Slump Continues in Q1"

Hana Financial Investment Report
Target Stock Price Down 22.5%

[Asia Economy Reporter Minji Lee] Hana Financial Investment maintained a buy rating on SeAH Besteel on the 14th and set a target price of 31,000 KRW, down 22.5%. This is based on the expectation of a challenging operating environment due to weak sales volume in the first quarter.

In the fourth quarter of last year, SeAH Besteel's standalone sales and operating profit were 463.4 billion KRW and 23.5 billion KRW, respectively, predicted to decrease by 14% and 33% compared to the previous quarter. It is estimated that the overall special steel sales volume (down 17% quarter-on-quarter) sharply declined due to disruptions in automobile production caused by semiconductor supply shortages and difficulties in securing export vessels amid the global logistics crisis. Seongbong Park, a researcher at Hana Financial Investment, said, "Fixed costs increased due to the decline in sales volume, and the rise in the average selling price of special steel was lower than the increase in scrap iron prices, resulting in operating profit falling short of market expectations (29 billion KRW). SeAH Changwon Special Steel also saw a decrease in sales volume, so consolidated operating profit is expected to be 44.7 billion KRW, down 31% from the previous quarter."

SeAH Besteel is expected to face a difficult operating environment in the first quarter of this year as well. Due to the rapid spread of the Omicron variant worldwide, securing export vessels is expected to remain challenging in the first quarter. The issue of semiconductor supply shortages for vehicles is also unlikely to be resolved in the short term. Last year, power outages, fires at major semiconductor production plants, and shutdowns due to COVID-19 cases were contributing factors, and this year, high-intensity lockdowns in Xi'an, China, have reduced semiconductor production facility operations since early in the year. Considering this, SeAH Besteel's special steel sales volume in the first quarter is predicted to reach 408,000 tons, a mere 7% increase compared to the previous quarter.

Researcher Park said, "As the second half of the year progresses, profitability improvement is possible with the easing of the logistics crisis and recovery of automobile production,” adding, "Currently, the company's price-to-book ratio (PBR) is 0.4 times, so the valuation burden is not significant."