[Click eStock] Posco's Continued Profitability Improvement... Buy Maintained

[Asia Economy Reporter Lee Seon-ae] SK Securities announced on the 1st that it maintains a 'Buy' investment rating and a target price of 480,000 KRW for POSCO, stating that POSCO's profitability improvement will continue.

POSCO's stock price showed a correction due to concerns over the Chinese government's intervention in raw material prices, a decline in domestic prices in China, and the possibility of a slowdown in performance momentum in the second half of the year. However, as China's production cut policies and the possibility of export taxes have come to the forefront, it is expected that China's export volume will gradually decrease in the future. Attention should also be paid to the fact that supply shortages are occurring in major markets due to carbon neutrality issues and demand improvements. In fact, unlike China where product prices have fallen, domestic distribution prices remain at a high level, and prices are rising in Europe and North America, showing a different pattern from the past.

Researcher Kwon Soon-woo of SK Securities said, "Based on these changes, price increases will continue in the second half of the year, and contrary to concerns, profitability improvement is expected to continue in the third quarter," adding, "We maintain the 'Buy' rating and target price."

Meanwhile, POSCO's 2nd quarter 2021 performance is expected to meet heightened market expectations with consolidated sales of 17 trillion KRW (YoY +24.1%), operating profit of 2.1 trillion KRW (YoY +1,139%, OPM 12.2%), separate sales of 8.7 trillion KRW (YoY +48.0%), and operating profit of 1.6 trillion KRW (YoY turnaround to profit, OPM 18.0%). The turnaround to operating profit and high profitability on a separate basis are partly due to the low base effect from the impact of COVID-19 in the same period last year, but the increase in sales and production in a supplier-favorable market and price increases exceeding raw material prices, which improved the spread, played a major role. The increase in profits in the overseas steel segment supported by the improvement in the global steel market and the solid performance of major subsidiaries also contributed to the increase in consolidated results.

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