[Click eStock] "Poongsan: Second Quarter to Benefit from Strong Domestic Defense Demand"

Second-Quarter Pre-Tax Profit Guidance Set at 100 Billion Won

On May 7, Korea Investment & Securities analyzed that Poongsan is expected to continue its earnings growth in the second quarter, following a surprise performance in the first quarter, driven by robust domestic demand in the defense sector. The firm maintained its target price at 90,000 won and its investment rating at 'Buy'.

In the first quarter, Poongsan's consolidated revenue reached 1.1559 trillion won (up 20% year-on-year), and operating profit was 69.7 billion won (up 28.5% year-on-year), exceeding market expectations by 33.3%. Choi Moonseon, a researcher at Korea Investment & Securities, explained, "Copper prices showed an upward trend, leading to strong results in the fabricated copper business and subsidiaries. In the defense sector, despite weak demand for sporting ammunition in the United States, sales exceeded 200 billion won thanks to increased domestic demand."

Researcher Choi presented Poongsan's second-quarter pre-tax profit guidance at 100 billion won, a 73% increase from the first quarter's 57.8 billion won. He cited several factors: the fabricated copper business is exposed to copper price volatility; defense exports are affected by changes in U.S. sporting ammunition demand and the course of regional conflicts; however, domestic defense demand remains relatively stable throughout the year due to the Ministry of National Defense's purchasing plans.

Choi added, "The company has doubled its large-caliber ammunition production capacity, securing the ability to respond to increased demand within the year. This means Poongsan has established the fundamentals to generate over 200 billion won in annual operating profit from the defense sector alone. However, the market still views Poongsan as a copper fabricator whose performance is dictated by copper prices. This disconnect is expected to be resolved through a valuation rerating."