[Click eStock] "Korea Zinc Expected to Achieve Record Quarterly Profit... Target Price Down 15%"

Daishin Securities Report

[Asia Economy Reporter Minji Lee] Daishin Securities maintained a buy rating on Korea Zinc on the 29th and set a target price of 670,000 KRW, down 15% from the previous target.

Second-quarter sales are expected to reach 3.0923 trillion KRW, and operating profit is forecasted at 366.1 billion KRW, representing growth of 30.2% and 34.1% respectively compared to the same period last year. The operating margin is predicted to rise by 0.3 percentage points to 11.8%. The logistics disruption issue, which was the cause of poor sales volume in the previous quarter, is understood to have been largely resolved.

Although there was some impact from the Cargo Solidarity Union strike in June, sales volume is analyzed to have normalized. Metal prices turned bearish from May, but zinc, which accounts for a high proportion of sales, saw an increase in average price. Researcher Taehwan Lee of Daishin Securities explained, “The newly agreed zinc benchmark TC increase will be reflected in this quarter’s results,” adding, “Retroactive profits will also be reflected for the first quarter’s delivery volume.”

A new business to watch is the announcement on the 2nd of the establishment of a precursor joint venture by LG Chem Kemco. Kemco is 35% owned by Korea Zinc but is an equity-method affiliate. Under the current structure, the impact on Korea Zinc’s performance is expected to be limited.

Attention is also drawn to the establishment of a 13,000-ton electrolytic copper foil production system by the consolidated subsidiary K-JAM. Quality improvement and approval from automobile companies are required, and the company plans to procure raw materials through recycling copper and waste wires it produces. Researcher Lee analyzed, “The company is actively pursuing new businesses and M&A investments using its cash holdings,” and “Future growth potential will expand.”