[Click eStock] "POSCO, Q4 Sales Recovery and Price Increase Expected to Improve Profitability"

[Asia Economy Reporter Eunmo Koo] Hana Financial Investment forecasted that POSCO's profitability will improve in the fourth quarter due to a recovery in sales volume and price increases.

On the 18th, researcher Seongbong Park of Hana Financial Investment estimated in a report that POSCO's standalone sales in the third quarter of this year would decrease by 18.2% compared to the same period last year, reaching 6.3 trillion KRW, and operating profit would shrink by 67.1% to 218.1 billion KRW. Park said, "The price increase policy attempted in the third quarter failed, so POSCO's average selling price of carbon steel is expected to fall by 13,000 KRW per ton compared to the previous quarter," adding, "Following the completion of the overhaul of Gwangyang No. 3 blast furnace and its restart, along with the global automobile factories resuming operations, overall product sales volume is recovering, and the raw material input cost is declining due to weaker coking coal prices. As a result, the carbon steel spread is expected to slightly widen compared to the previous quarter, and operating profit will slightly exceed the market consensus of 189.3 billion KRW."

Profitability is expected to improve due to sales volume recovery and price increases in the fourth quarter. Park said, "Although most global automobile factories resumed operations between May and June, the operating rates rose more slowly than expected," adding, "However, in the fourth quarter, with the full-scale increase in operating rates of global automobile factories, demand for POSCO's automotive steel sheets is also expected to recover."

He continued, "At the same time, POSCO is pushing for price increases to improve profitability. In September, it announced two rounds of hot-rolled coil price increases for distribution channels, raising prices by 50,000 KRW per ton, and other products are also expected to see price hikes," adding, "Supported by China's robust domestic steel demand, the strong steel distribution prices in China have continued, and as of mid-September, most products have recovered to pre-COVID-19 levels, which will increase the likelihood of success for POSCO's price increase policy."

The investment opinion and target stock price were maintained at 'Buy' and 270,000 KRW, respectively. Park explained, "After recording a standalone operating loss in the second quarter, the operating situation is judged to have passed the worst, and performance improvement is expected as we move into the fourth quarter."

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