[Click eStock] "Dongkuk Steel, Strong Q2 Earnings Expected to Continue... Target Price Up 22%"

[Asia Economy Reporter Park Jihwan] Hyundai Motor Securities on the 6th maintained a Buy rating on Dongkuk Steel with expectations of continued strong performance in the second quarter, raising the target price by 21.82% from the previous 5,500 KRW to 6,700 KRW.

Hyunwook Park, a researcher at Hyundai Motor Securities, evaluated, "Dongkuk Steel is expected to sustain solid performance in the second half following the first half, and with a P/B ratio of 0.26 times, which is at the lower end of its historical band, it also holds valuation appeal."

Operating profit on a consolidated basis for the second quarter is expected to be 88.4 billion KRW, up 12% year-on-year and 58% quarter-on-quarter. Researcher Park said, "Profitability in the long product segment is expected to improve," adding, "Although domestic demand for rebar is decreasing month by month, the focus is on profitability, so the spread is estimated to remain at a high level."

He explained, "Sales volume of H-beams is estimated to have increased. According to the Steel Association statistics, average domestic shipments of H-beams in April and May are expected to rise 3% year-on-year and 6% quarter-on-quarter," and added, "Cold-rolled steel has a high export ratio, so sales volume is inevitably expected to decline quarter-on-quarter, but profitability is estimated to be favorable due to weak raw material prices."

For the third quarter, it is expected that the long product segment’s performance will decline compared to the second quarter due to the off-season and rising steel scrap prices. Researcher Park said, "Price increases in the cold-rolled and heavy plate sheet segments are also expected to take place during the second half."

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