[Click eStock] "Dongkuk Steel, Need to Watch Effects of Splitting into Two Business Units"

Yuanta Securities Report

Yuanta Securities maintained a 'Buy' rating on Dongkuk Steel on the 21st but lowered the target price from 22,000 KRW to 18,000 KRW due to revisions in this year's operating profit estimates. The target price has been on a downward trend since it was set at 30,000 KRW in September 2021.

Researcher Hyunsoo Lee stated, "The Chinese subsidiary, which had been unprofitable for several years, was disposed of in 2022, and the sale of CSP, the biggest uncertainty, was completed in March 2023. When transitioning to a holding company, investments in new businesses can be considered more actively." However, he added, "It remains to be seen what advantages there are in splitting the hot-rolled and cold-rolled divisions, which have been integrated as one organization for over eight years, separately again compared to splitting into one business company (steel division)."

Dongkuk Steel plans to carry out a spin-off for the purpose of transitioning to a holding company. The split date is June 1. The spin-off will divide the company into three entities: the holding company Dongkuk Holdings, and the business companies Dongkuk Steel (hot-rolled) and Dongkuk CM (cold-rolled).

While the transition to a holding company is positive for expanding new business investments, the effects of splitting into two business companies need to be observed. Researcher Lee said, "It remains to be seen what advantages there are in splitting the hot-rolled and cold-rolled divisions, which have been integrated as one organization for over eight years, separately again compared to splitting into one business company (steel division)."