[Click eStock] Korea Zinc Exceeds Expectations in 1Q... Operating Profit Up 15% YoY

1Q Operating Profit 204.3 Billion KRW... Exceeds Market Expectations by Over 10%
Strong Performance Expected in 2Q as Well... "Best Trend Within the Industry"

[Asia Economy Reporter Minwoo Lee] Korea Zinc's first-quarter operating profit exceeded market expectations (consensus) and increased by more than 15% compared to the same period last year. Although a slight decline is expected in the second quarter due to weakness in non-ferrous metals, the outlook remains favorable.

According to Hi Investment & Securities on the 28th, Korea Zinc's consolidated sales for the first quarter of this year reached 1.733 trillion KRW, and operating profit was 204.3 billion KRW. Compared to the first quarter of last year, sales increased by 15.8% and operating profit by 15.1%. The operating profit exceeded the market consensus of 184.2 billion KRW by more than 10%.

The strong operating profit from the headquarters was a key factor. The headquarters' operating profit was 196.8 billion KRW, surpassing the market consensus of 164.2 billion KRW by about 20%. Kim Yoonsang, a researcher at Hi Investment & Securities, explained, "The temporary mismatch between sales prices applying London Metal Exchange (LME) prices from December, January, and February and costs applying prices from January, February, and March improved profits by about 25 billion KRW compared to the previous quarter," adding, "Rationalization of the zinc casting plant and partial reflection of benchmark smelting charges (TC) in the first quarter also had a positive impact."

However, the poor performance of subsidiaries such as SMC and Zinc Ox Corporation was regrettable. Researcher Kim analyzed, "This is because the low-grade zinc concentrate (LGZC) from SMC, which plays the role of 'zinc mine' within the company, and the profitability of Zinc Ox's zinc oxide deteriorated," adding, "The main causes were the sharp drop in zinc prices, sluggish sales volume, and decline in TC."

The operating profit in the second quarter is also expected to remain at a favorable level. However, it is forecasted to fall by about 9.2% from the previous quarter to 186 billion KRW. This is due to a decrease in sales following the weakness in non-ferrous metals since last month and the disappearance of the temporary profit effects seen in the first quarter. Researcher Kim stated, "However, this year’s increases in benchmark smelting charges and refining charges (RC) for zinc, lead, and silver, as well as the retroactive effect of the first quarter’s non-application (about 60 billion KRW profit improvement compared to the previous quarter, combined for all products), will significantly offset the factors slowing performance," adding, "It is the most favorable trend within the industry."

Accordingly, Hi Investment & Securities maintained a 'Buy' investment rating and a target price of 470,000 KRW for Korea Zinc. The closing price on the previous day was 395,000 KRW.

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