[Click eStock] "SeAH Steel, Relatively High Profit Margin... Target Price Maintained at 220,000 Won"

Hana Securities maintained a buy rating and a target price of 220,000 KRW for SeAH Steel on the 7th, stating that despite sluggish domestic demand, the company is recording relatively high profit margins.

In the fourth quarter of 2023, SeAH Steel's revenue and operating profit were 437.4 billion KRW and 44.4 billion KRW respectively, with operating profit exceeding the market consensus of 40.5 billion KRW.

Due to price stabilization of energy steel pipes in the U.S., the export margin for steel pipes remained in the mid-teens percentage range, similar to the third quarter. Although the domestic steel pipe ASP declined, the price of hot-rolled steel, a major raw material, also fell simultaneously, resulting in a margin rate similar to that of the third quarter. Total steel pipe sales recorded 244,000 tons, exceeding initial expectations due to export-driven recovery.

While the margin rate is expected to be maintained in the first quarter, sales volume is anticipated to slightly decrease. Due to the impact of weak demand in downstream industries, domestic steel pipe sales in the first quarter are expected to slightly decline. Exports are also expected to be affected, with the fourth quarter’s high base effect influencing the figures, resulting in a total steel pipe sales volume of 2.39 million tons in the first quarter. Regarding margin rates, domestic hot-rolled steel manufacturers including POSCO announced aggressive price increases starting in January, and SeAH Steel also announced domestic price hikes to pass on the increased raw material costs. Therefore, a domestic margin rate of around 3%, similar to the fourth quarter, is expected. Considering this, SeAH Steel’s operating profit for the first quarter is projected to be 41.5 billion KRW.