[Click eStock] "Hyundai Steel Presents Mid-Term Growth Vision with U.S. Steel Mill Construction"

Daishin Securities stated on May 27 that Hyundai Steel has announced plans to construct an integrated steel mill in Louisiana to supply automotive steel sheets to the United States. The firm maintained its "Buy" investment rating and a target price of 36,000 won, commenting that Hyundai Steel has secured a solid business with a sound rationale for its mid-term growth vision.

On the same day, Daishin Securities researcher Lee Taehwan explained, "The target price was calculated by applying a target price-to-book ratio (PBR) of 0.25 times to the 12-month forward book value per share (12MF BPS) of 143,176 won. The target PBR reflects the average level seen during the industry downturn in 2019-2020." He also noted, "If Chinese production cuts and anti-dumping (AD) duties on hot-rolled steel are confirmed, there is potential for further upward revision of earnings forecasts."

In the first quarter, Hyundai Steel posted consolidated sales of 5.6 trillion won, down 6.5% year-on-year, and recorded an operating loss of 19 billion won. Although the company reported operating losses for two consecutive quarters, the deficit narrowed. Lee pointed out, "At the beginning of the year, a strike and lockout at the Dangjin cold-rolling plant led to sluggish production, and the market for long steel products remained depressed." He added, "Sales volume decreased to 4,126,000 tons, but compared to the fourth quarter, when one-off costs totaled 150 billion won and the base was low, there was improvement."

For the second quarter, Lee expects a return to profitability, citing increased sales volume due to normal operations during the peak season and improved mill margins. He also analyzed that the profit environment should improve further in the second half of the year.

A notable point is the U.S. market. Lee stated, "Hyundai Steel has announced a plan to construct an integrated steel mill in Louisiana to supply automotive steel sheets to the U.S. market." He explained, "The plant is planned to have an annual production capacity of 2.7 million tons (1.8 million tons of automotive steel sheets and 900,000 tons of general steel sheets). The total expected investment is $5.8 billion, but the equity structure has not yet been finalized."

He added, "The U.S. market features relatively low raw material costs but commands the highest steel price premiums. It is a region with strong demand for high-margin automotive steel sheets. By leveraging a modern integrated steel mill, Hyundai Steel can reduce transportation and coating costs compared to competitors. With a sales mix centered on automotive steel sheets, the company is expected to achieve differentiated profitability once operations stabilize."