[Click eStock] "Hyundai Steel, Industry Recovery Slower Than Expected... Target Price Down"

Target Price Revised Downward by 10% Compared to Previous Level

On the 24th, NH Investment & Securities downgraded the target price for Hyundai Steel from 48,000 KRW to 43,000 KRW, citing that the improvement in the industry conditions is delayed more than expected. The investment rating was maintained as 'Buy.'

Researcher Lee Jaekwang of NH Investment & Securities explained, "The target price downgrade reflects the lowered future earnings estimates due to the delayed improvement in the steel industry conditions initially expected. Despite the sluggish industry, considering the undervaluation compared to asset value (PBR 0.2x), it is necessary to focus more on factors that could improve future performance."

With the continued sluggish industry conditions, the second-quarter earnings this year are expected to fall short of market expectations. Lee said, "Operating profit on a consolidated basis for the second quarter is expected to increase compared to the previous quarter but decrease year-on-year, falling short of the consensus (average securities firm forecast). Although an improvement in the steel industry was initially expected during the second quarter, the ongoing sluggishness has led to a 5% decline in the average domestic hot-rolled distribution price and an 8% drop in rebar compared to the previous quarter. Plate products are expected to face increased imports from China, and shipments of long products are anticipated to decrease due to the sluggish construction industry."

He also noted that the shift to an increase in domestic building permits area is a point to watch. Lee stated, "Exports continue to rise due to weak domestic demand in China's steel market in the second quarter. However, the increase in building permits area compared to the previous year is noteworthy. Up to May, the building permits area increased by 5.6% year-on-year, which is expected to lead to improved rebar demand in the second half of the year." He added, "Furthermore, if the recent Chinese government crackdown plan on illegal low-priced exports is properly implemented, it could contribute to an overall improvement in steel supply and demand."