[Click eStock] "Pungsan, Significant Earnings Improvement Expected in Q2 This Year"

[Asia Economy Reporter Park Jihwan] Hi Investment & Securities maintained a 'Buy' rating and a target price of 37,000 KRW for Pungsan, stating that a significant improvement in performance is expected from the second quarter of this year.

Kim Yoonsang, a researcher at Hi Investment & Securities, evaluated that the standalone operating profit for the fourth quarter of last year increased by 14.3% quarter-on-quarter to 35.1 billion KRW, slightly below the market expectation of 39.1 billion KRW. He explained that while the civilian sector's performance showed little change compared to the previous quarter, the defense sector's performance did not improve significantly despite a large increase in sales. This was attributed to the recognition of bonuses and an increase in sales of low-margin products, which slightly eroded the profit margin.

Performance in the first quarter of this year is expected to slow down due to a decrease in defense sales, but a significant improvement in performance is anticipated in the second quarter. The consolidated operating profit for the first quarter is expected to be 37 billion KRW, a 31.1% decrease from the previous quarter. Researcher Kim Yoonsang emphasized, "The decrease in defense sales in the first quarter is a temporary gap that occurs every year as defense sales surged significantly in the previous quarter, so there is no reason for concern. Rather, attention should be paid to the meaningful performance improvement in the second quarter, when bonus recognition is completed and defense sales gradually increase."

The operating environment for the civilian sector this year is very favorable. He emphasized, "A recovery in sales volume, which had been sluggish due to increased demand from economic recovery, is expected, and the supply and demand of copper concentrate are positive in both the short and medium to long term." Due to supply disruptions at Las Bambas in Peru, the current supply of copper concentrate is tight, which is also evidenced by the copper TC/RC, which has fallen to historically low levels.

Researcher Kim stated, "A soft landing is needed where the expected slowdown in ammunition exports to the U.S. region this year is offset by ammunition exports outside the U.S. region, as in 2017. If a soft landing is assumed, the stock price is also expected to fully reflect the favorable fundamentals of copper and the civilian sector."

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