Expectations for 'Steel Stocks' Heating Up Like a Furnace in Q4

POSCO, Hyundai Steel, and Others Expected to Recover Earnings with Iron Ore Price Stabilization
Stock Prices Also Positive

[Asia Economy Reporter Oh Ju-yeon] Although domestic steel companies' earnings in the third quarter of this year were sluggish, they are expected to show improvement starting from the fourth quarter.

According to financial information firm FnGuide on the 19th, POSCO's operating profit for the third quarter of this year, estimated by three or more securities firms, is expected to be around 430 billion KRW, a 58.7% decrease compared to the same period last year. However, in the fourth quarter, earnings are expected to recover due to the stabilization of iron ore prices, alleviation of concerns over rapid cost increases, strong global steel prices, and product price hikes. POSCO's operating profit for the fourth quarter is forecasted to increase by 12.0% year-on-year to 625 billion KRW.

Kwon Soon-woo, a researcher at SK Securities, said, "Not only the earnings recovery but also the low valuation based on the price-to-book ratio (PBR 0.39 times), ongoing share buybacks, and expectations of infrastructure expansion in major countries will be positive factors for the stock price going forward." Thanks to this, despite the forecasted decline in third-quarter earnings, POSCO's stock price rose 6.12% from 196,000 KRW on the 29th of last month to 208,000 KRW as of 9:45 a.m. today.

Hyundai Steel's operating profit for the third quarter is also expected to decline by 9.5% year-on-year to 30.8 billion KRW, continuing the poor performance, but it is estimated to turn profitable in the fourth quarter after a loss last year. The stock price rose nearly 20% from the 26,000 KRW range earlier this month to 30,850 KRW as of the closing price on the 16th. Today, it recorded 32,000 KRW, up 3.73% during the session.

In the securities industry, there is not only anticipation for a return to profitability in the fourth quarter but also a need to pay attention to the 'hydrogen fuel electric vehicle project' in the mid to long term. Hyundai Steel's hydrogen-related business can be divided into metal separator plates used in hydrogen vehicles and hydrogen gas produced from by-product gas at steel mills. Bang Min-jin, a researcher at Eugene Investment & Securities, said, "Hyundai Steel has the capacity to produce 17,000 metal separator plates annually, which are one of the core components of fuel cells, and plans to expand production by more than 30,000 units in 2022," adding, "If the production volume of hydrogen vehicles exceeds 200,000 units, annual sales are expected to reach around 400 billion KRW."

Kim Mi-song, a researcher at Cape Investment & Securities, also explained, "While the stock price has risen 22% over the past month reflecting expectations for hydrogen-related business, it is still undervalued," and added, "Profitability is expected to improve significantly from next year through restructuring effects in low-profit business divisions and changes in sales strategies in the long product business."

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