[Weekly HOT Stocks] POSCO, Q3 Earnings Recovery Expected... Institutional Investors Show 'Net Buying' Trend

[Asia Economy Reporter Geum Bo-ryeong] POSCO attracted institutional investors' attention throughout the week as expectations for a turnaround in the third quarter increased.

According to the Korea Exchange on the 26th, institutional investors net purchased POSCO shares worth 112.4 billion KRW between the 21st and 25th. POSCO ranked second among the top stocks net purchased by institutional investors.

POSCO's earnings recovery is expected to become visible from the third quarter. Samsung Securities estimates POSCO's third-quarter consolidated operating profit at 568 billion KRW and sales at 14.6 trillion KRW. The operating profit exceeds the consensus by 34%.

Researcher Baek Jae-seung of Samsung Securities explained, "The parent company's earnings are expected not only to turn profitable based on fixed cost reductions due to recovery in sales volume to downstream industries, product mix improvements, and steel distribution price increases that began in earnest after July, but also to exceed market expectations." In consolidated earnings, the peak season effect of POSCO Energy is expected to contribute more to performance improvement than the previous quarter.

The sales slump, which was the background of the poor performance in the second quarter, is showing signs of recovery in the third quarter. Researcher Hong Sung-woo of KB Securities said, "In the second quarter, automobile production decreased by nearly half compared to the same period last year, causing automobile steel sheet (cold-rolled) sales to decline more than expected, which worsened the product mix. Since the sales disruption was caused by regional lockdowns and artificial shutdowns of factories, industries that were heavily affected can expect compensatory volumes and base effects as the economy recovers and the impact of COVID-19 subsides. Currently, the operating rates of major automobile-producing countries have recovered to the 70% range," he analyzed.

Cost burdens are being offset by price increases. Iron ore prices rose from $81 per ton in early April to $130 per ton in mid-September. Coking coal, which had been weakening and reducing the burden of the iron ore price surge, has recently rebounded. Researcher Kim Hyun-wook of Shinhan Financial Investment said, "POSCO plans to offset cost burdens through price increases. In response to the poor performance in the second quarter, aggressive price hikes are underway for drawing wire, steel pipes, and distribution volumes. The average selling price (ASP) of carbon steel was raised by 20,000 to 30,000 KRW this month. Additional price increases are planned for the fourth quarter."

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