[Click eStock] "Korea Zinc, The Worst Is Over but PBR of 1x Is a Burden"

On the 9th, Korea Investment & Securities evaluated Korea Zinc, stating that "the worst period of poor performance has passed, but the price-to-book ratio (PBR) of 1 remains burdensome." The investment opinion was maintained as 'neutral' without presenting a target price.

Researcher Choi Moon-sun of Korea Investment & Securities forecasted that Korea Zinc's sales in the first quarter of this year would increase by 3.6% year-on-year to KRW 2.617 trillion, and operating profit for the same period would rise by 38.2% to KRW 201.5 billion. This slightly exceeds market expectations. Researcher Choi explained, "Although the prices of the main products, zinc and copper, fell by 1.3% and 5.8% respectively, the rise in gold and silver prices offsets this, and the increase in precious metals shipments is expected to result in favorable performance."

Researcher Choi cited two reasons for the poor performance in 2022 and 2023. He said, "The first is the decline in copper smelting volume, and the second is the poor performance of newly included subsidiaries. However, the import volume of copper concentrate has now normalized, and the recent strength in copper prices could be a factor in improving the performance of some subsidiaries." He analyzed, "The worst period has passed, and the two major issues causing poor performance are in the process of being partially resolved."

However, the problem lies in valuation, according to Researcher Choi. He stated, "Return on equity (ROE) is expected to improve from 5.7% last year to 6.7% this year and 8% in 2025," but added, "Considering the cost of equity at 9%, a PBR valuation of 1 is a burdensome level."