[Click eStock] "Korea Zinc, a Good Company but Expensive... Investment Rating Downgraded"

Shinhan Investment Corp. downgraded its investment opinion on Korea Zinc to 'neutral' on the 7th, citing prolonged non-fundamental issues such as management disputes that have increased investor fatigue.

Researchers Park Kwang-rae and Han Seung-hoon of Shinhan Investment Corp. stated in their report titled "Korea Zinc: Good Company, Expensive Stock" that "it is necessary to wait until a time when fundamentals can be more prominently recognized."

Source: Shinhan Investment Corp.

Researcher Park said, "We are downgrading the investment opinion from 'buy' to 'neutral'," and presented a fair market capitalization of approximately 13 trillion KRW. He pointed out, "Even assuming the company's targeted 'Troika Drive,' the current market capitalization is burdensome in the short term." Korea Zinc's new growth engine, Troika Drive, refers to a strong push in resource circulation business through recycling, renewable energy and green hydrogen business, and secondary battery material industry alongside the existing smelting business.

As of the previous day, Korea Zinc's stock price was 790,000 KRW per share. Researcher Park anticipated that given the prolonged non-fundamental issues, a meaningful performance improvement in subsidiaries related to secondary battery materials such as KEMCO (nickel smelting) and KPC (precursor) could lead to a rebound in Korea Zinc's stock price.

Looking at Korea Zinc's Q4 results last year, sales reached 3.4 trillion KRW and operating profit was 132.8 billion KRW, marking 100 consecutive quarters of operating profit surplus. Researcher Park noted, "There was significant top-line growth due to increased zinc sales volume, rising metal prices, and the acquisition of Cateman," but also pointed out that operating profit decreased by 32.9% year-on-year due to reduced production from large-scale maintenance work at Australia's SMC. Net profit turned to a loss of 228.6 billion KRW, reflecting a large foreign currency debt valuation loss caused by a sharp rise in the year-end exchange rate.

Regarding the sales target for 2025, he said, "This year, separate sales are expected to reach 8.9 trillion KRW and operating profit 735.3 billion KRW," and added, "Considering the start of normal operations, recovery of production volume leading to normalization of SMC's performance, and growth of other subsidiaries, consolidated operating profit is expected to maintain the previous year's level."