[Click eStock] "POSCO, Q2 Earnings Plummet Due to COVID Impact"

[Asia Economy Reporter Oh Ju-yeon] NH Investment & Securities forecasted that POSCO's consolidated operating profit for the second quarter of this year will remain at a slight surplus level due to the impact of the novel coronavirus disease (COVID-19), indicating a sluggish performance. However, they expect sales volume recovery from the second half of the year with the reactivation of upstream industries, maintaining a 'Buy' investment rating and a target stock price of 230,000 KRW.

According to NH Investment & Securities on the 29th, POSCO's consolidated sales for the second quarter of this year are expected to be 13.2119 trillion KRW, and operating profit is forecasted at 57.5 billion KRW, down 19.1% and 94.6% respectively compared to the same period last year.

On a standalone basis, an operating loss of 10.3 billion KRW is projected.

Researcher Byun Jong-man stated, "The average selling price (ASP) of carbon steel is estimated to have declined by 40,000 KRW compared to the previous quarter, worsening profitability," and added, "Although sales volume is expected to be 7.81 million tons, higher than the estimated 7.27 million tons at the end of April, the decline in ASP due to a reduced proportion of cold-rolled steel sales caused by the global automotive plant production halt amid COVID-19 in the second quarter had a greater negative impact on profits."

He anticipated that product sales volume could recover in the second half of the year. Researcher Byun said, "Although the COVID-19 situation continues, economic activities are expected to resume in the second half, leading to a recovery in demand from upstream industries including automobiles starting from the third quarter. Additionally, the Gwangyang No.3 blast furnace, which completed maintenance by the end of May, is expected to restart operations in July, contributing to sales volume recovery." Accordingly, the annual sales volume forecast for 2020 was raised from the previous 32.07 million tons to 33.17 million tons.

However, ASP is expected to rebound in the third quarter due to the recovery of steel prices in China and the rise in iron ore prices, but it is analyzed that performance improvement will be limited as it is difficult to fully pass on raw material costs.

Earnings per share (EPS) forecasts for 2020 and 2021 were lowered by 22.9% and 21.8%, respectively, and the annual expected dividend per share for 2020 and 2021 was also lowered to 6,000 KRW. Nevertheless, Researcher Byun added, "Although the current dividend yield has decreased to 3.3%, shareholder returns should be considered together with the ongoing 1 trillion KRW scale share repurchase."

Researcher Byun said, "Considering that POSCO, a cyclical stock, had an average price-to-book ratio (PBR) of 0.53 times over the past five years, the recent PBR of 0.35 times already reflects the deteriorated business environment," and added, "Despite the downward revision of EPS forecasts, we maintain the target stock price at 230,000 KRW and the investment rating as 'Buy.'"

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