[Click eStock] “Hyundai Steel, Q4 Last Year Was the Bottom, Expecting Quarterly Improvement This Year”

[Asia Economy Reporter Eunmo Koo] DB Financial Investment forecasted that although Hyundai Steel recorded an earnings shock in the fourth quarter of last year due to weak demand, a decline in average selling prices, and one-time costs such as voluntary retirement, it is possible to see quarterly improvements from the bottom in the fourth quarter results. The decline in raw material prices and the improving performance trend of Hyundai and Kia Motors are expected to positively impact Hyundai Steel's profitability this year.

On the 29th, Hyundai Steel announced through a disclosure that its consolidated sales for the fourth quarter of last year decreased by 9.2% year-on-year to KRW 4.8218 trillion, and the operating profit margin recorded -3.1%. Kim Hong-gyun, a researcher at DB Financial Investment, explained in a report on the 30th, "The fixed cost burden increased due to weak sales caused by decreased demand for long products and flat products," adding, "Major one-time costs included KRW 20 billion for disposal of obsolete inventory, KRW 20 billion for carbon emission provisions, and KRW 10 billion for workforce restructuring expenses." He also noted that the profit and loss of overseas subsidiaries worsened due to the deepening slump in the Chinese market.

The decline in raw material prices and the improving performance trend of Hyundai and Kia Motors are expected to positively influence Hyundai Steel's profitability this year. Researcher Kim said, "The impact of the novel coronavirus in the Chinese market is highly likely to further push down the direction of steel raw material prices," and added, "Profitability improvement is expected through expanding the global automotive steel sheet customer base and increasing sales of premium products for seismic steel and marine equipment." He continued, "For meaningful performance improvement, economic recovery in demand industries and price increases for automotive steel sheets are necessary," and noted, "Fortunately, as Hyundai and Kia Motors, which are affiliates and the largest customers with a high sales proportion, are showing improving performance, the results of price negotiations with automakers will be a key variable for profitability improvement this year."

The investment opinion and target stock price were maintained at 'Buy' and KRW 41,000, respectively. Researcher Kim stated, "The price increase efforts that began at the end of last year will be reflected in performance improvements with a time lag," and forecasted, "This year, the development of high-margin new steel grades, increased sales of premium products, and the special steel division reaching its break-even point will contribute to profitability improvement."

This content was produced with the assistance of AI translation services.