[Click e Stocks] "Korea Steel, Stronger Second Half Performance Expected Due to Increased Rebar Demand"

[Asia Economy Reporter Song Hwajeong] Hyundai Motor Securities maintained its 'Buy' rating and target price of 14,800 KRW for Hankook Steel on the 23rd, expecting strong performance in the second half of the year.

Hyunwook Park, a researcher at Hyundai Motor Securities, said, "Rebar demand in the second half is expected to increase compared to the first half, benefiting Hankook Steel, the fourth-largest domestic rebar company," adding, "The current stock price is significantly undervalued with a price-to-book ratio (PBR) of 0.5 times relative to profitability."

Hankook Steel recorded sales of 238.2 billion KRW and operating profit of 36.4 billion KRW in the second quarter of this year. Operating profit increased by 177% year-on-year and 620% quarter-on-quarter. Park explained, "The strong second-quarter performance was driven by increased domestic rebar demand and an expanded spread due to rebar price hikes," adding, "Domestic rebar demand in the second quarter was 3.04 million tons, an 11% increase year-on-year, and domestic rebar companies raised the standard rebar price by 130,000 KRW compared to the first quarter."

Hyundai Motor Securities estimated Hankook Steel's third-quarter operating profit at 34.5 billion KRW, a 289% increase year-on-year, and forecasted operating profit for the second half to rise 524% to 73.6 billion KRW. Park said, "Although sales volume will decrease quarter-on-quarter due to the off-season, the spread will improve due to rebar price increases," noting, "The standard rebar price was raised by 80,000 KRW in July and August."

Rebar demand growth is expected to continue through 2023. Park stated, "We expect domestic rebar demand this year to increase by 7% year-on-year to 10.62 million tons," explaining, "With domestic rebar production capacity at around 11.4 million tons, the supply and demand balance will inevitably be tight." He added, "Demand in the second half of this year is expected to increase more than in the first half, and demand growth will continue through 2023."

Hankook Steel's stock price remains undervalued. After completing restructuring of low-profit divisions (forging) last year, the return on equity (ROE) is expected to exceed 14% this year, but the PBR is only 0.5 times and the price-to-earnings ratio (PER) is just 4 times. Park said, "Considering the increase in rebar demand and the direction of performance improvement, the stock price is expected to trend upward in the future."

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