[Click e-Stock] "Hyundai Steel: Turnaround to Profitability and Hopes for Production Cuts... Target Price Up"

On July 7, Sangsangin Securities announced that it is raising its target price for Hyundai Steel to 43,000 won, citing the company's turnaround to profitability and growing expectations of production cuts in China.

Hyundai Steel's second-quarter results are expected to show sales of 5.8 trillion won, a 2.8% decrease year-on-year but a 5.5% increase quarter-on-quarter. Operating profit is projected at 81.9 billion won, which represents a 16.4% decrease compared to the same period last year, but marks a turnaround from the previous quarter's loss. However, these results are expected to fall slightly short of the market consensus, which anticipates sales of 5.7 trillion won and operating profit of 105.2 billion won.

Kim Jinbeom, a researcher at Sangsangin Securities, stated, "The one-off factors that hindered profit recovery in the first quarter have been removed, and thanks to improved spreads across plate and long steel products, a turnaround to profitability is expected." Recently, Hyundai Steel has continued its production reduction policy. Following the suspension of operations at the Incheon rebar plant in April, the Dangjin rebar line has been idle from June 29 to July 15, and the Incheon rebar plant will undergo regular maintenance from July 21 to August 31.

Kim predicted, "Considering the current construction environment, a full-fledged recovery in the construction market in the second half of the year will be limited. However, the price of long steel products is expected to remain stable."

Structural reforms and production cuts in China may also act as positive factors. On July 2, the Central Financial and Economic Affairs Commission of China announced plans to promote restructuring and production cuts in the local steel, solar, and cement industries, which is being interpreted as positive news for the Korean steel industry.

Kim emphasized, "Since the need for production cuts in the Chinese steel industry was mentioned at the National People's Congress in March, there has been no specific guidance, so this is very encouraging news for the Korean steel industry." He added, "Doubts about the actual implementation of production cuts in the Chinese steel industry are expected to be resolved in the short term." In particular, he noted that news of production cuts in the Tangshan region's steel industry is also expected to have a positive impact.