[Click eStock] "Korea Zinc, Q2 Earnings Meet Consensus"

NH Investment & Securities "Downgrades Korea Zinc Investment Rating to 'Neutral'"
Average Annual Price Increase of Zinc and Lead... Lead Sales Volume Up 9.2% QoQ

[Asia Economy Reporter Gong Byung-sun] Korea Zinc's second-quarter performance this year is expected to meet market consensus, supported by rising prices of zinc and lead. The recent surge in stock price is interpreted as reflecting expectations for the newly entered precursor business.

On the 19th, NH Investment & Securities estimated Korea Zinc's second-quarter sales at 2.1168 trillion KRW, a 30.5% increase compared to the same period last year, and operating profit at 222.9 billion KRW, a 35.9% increase over the same period. These figures correspond to the consensus estimates of 2.1701 trillion KRW and 213.3 billion KRW, respectively.

The performance meeting consensus appears to be due to the price increases of zinc and lead. The annual average prices of zinc and lead rose by 28.4% and 19.9%, respectively, compared to the previous year. Additionally, lead sales volume is expected to have increased by 9.2% quarter-on-quarter due to inventory sales.

NH Investment & Securities analyzed that the recent sharp rise in stock price largely reflects expectations for the precursor business for cathode materials. The stock price rose by 11.0% and 3.7% on the 14th and 15th, respectively. Researcher Byung-man Byun of NH Investment & Securities explained, “The news of signing a memorandum of understanding to establish a joint venture with LG Chem for the production of precursors for cathode materials contributed to the stock price increase,” adding, “Although the investment scale and facility expansion plans are not yet concrete, the sales value of the precursor business has been priced in advance.”

Accordingly, NH Investment & Securities downgraded Korea Zinc's investment opinion from ‘Buy’ to ‘Hold’. The target stock price was maintained at 495,000 KRW. The closing price on the previous day was 489,000 KRW.

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