[Click eStock] Hyundai Steel, Valuation Possible at Average Level 'Target Price Up 6%'

[Asia Economy Reporter Lee Seon-ae] Meritz Securities announced on the 29th that it is raising the target price of Hyundai Steel by 6% to 53,000 KRW, based on the judgment that the stock price can rise to a normal valuation level considering the restructuring effects that will fully materialize from 2021 and the favorable conditions in the upstream industries.

Hyundai Steel's operating profit in the fourth quarter of last year turned positive at 55.4 billion KRW but fell significantly short of the consensus estimate (101.4 billion KRW). The main reason was the one-time expenses of about 40 billion KRW, including provisions due to delayed wage negotiations. Additionally, non-operating expenses of approximately 190 billion KRW were recorded, including asset impairment of some idled facilities and fines related to collusion in scrap metal purchases, which severely worsened the net profit. However, although it will be difficult to improve performance in the first quarter of this year due to the full reflection of the sharply rising scrap metal prices, from the second quarter onward, it is expected to enter a stepped profit growth cycle along with rising rebar prices.

Empirically, the trend of Hyundai Steel within the industry has been determined by the stock price trend of Hyundai Kia Motors. The sharp stock price rise until mid-January can also be understood in this context. In fact, the improvement in Hyundai Kia Motors' performance is a factor that raises the possibility of automobile steel sheet price increases higher than at any time since the first half of last year. The increase in demand for hydrogen separation membranes due to the opening of the hydrogen car market is also positive.

Researcher Moon Kyung-won of Meritz Securities explained, "Although the relatively steep recent stock price rise within the business is somewhat burdensome, considering the favorable conditions in the upstream industries this year, we slightly raised the appropriate multiple from 0.40x to 0.43x (the average since 2015), and thus maintain a buy rating with a target price of 53,000 KRW."

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