A Different Hyundai Steel Than Before... 3Q 'Surprise Earnings' Expected

3Q Operating Profit Expected to Surpass 700 Billion KRW... 7 Consecutive Quarters of Increase
Steady Progress with Steel Spread Improvement... More Growth Potential Remains

Hyundai Steel Incheon Plant View (Provided by Hyundai Steel)

[Asia Economy Reporter Minwoo Lee] Hyundai Steel is expected to post earnings in the third quarter of this year that significantly exceed market consensus. Despite the off-season, a solid profit growth trend is anticipated due to rising steel prices.

On the 18th, Samsung Securities forecast that Hyundai Steel will record consolidated sales of 5.567 trillion KRW and operating profit of 734.3 billion KRW in the third quarter of this year. Compared to the same period last year, sales are expected to increase by 48.2%, and operating profit by 3910.1%. The operating profit is estimated to surpass market expectations by 25%. Compared to the previous quarter, sales and operating profit are expected to rise by 13% and 16%, respectively, marking seven consecutive quarters of operating profit growth.

Despite the off-season, both flat products and long products have shown improved spreads based on rising steel prices, sustaining solid profit growth. Jaeseung Baek, a researcher at Samsung Securities, explained, "The rise in Korean steel prices is due to supply shortages caused by China's steel export restrictions. Hot-rolled and cold-rolled distribution prices have continued to increase through this month, and the price hike decision for shipbuilding-oriented heavy plates was made faster and more significantly than expected, which underpins the strong third-quarter performance."

He also judged that the slight weakening of rebar distribution prices since last month due to seasonal factors is not a major concern. With the construction peak season expected after the Chuseok holiday, there is no significant need to worry about the long products business.

Researcher Oh forecasted that the market trend of strengthening eco-friendly policies is accelerating changes in the steel industry. Since the steel price adjustment began in China last May, a pattern different from historical trends has started to emerge. Oh explained, "Despite China's steel price adjustments, Korean steel prices have continued to rise, and even though iron ore prices fell, steel prices did not adjust accordingly, resulting in an improved spread recently. This is due to the newly emphasized ESG (Environmental, Social, and Governance) trends, expectations for China's government to implement steel production cuts, and policies by the Chinese government to restrict steel exports to stabilize prices."

Therefore, he emphasized that investment decisions based on historical trends may no longer be reasonable. Oh analyzed, "Despite changes in the steel industry, the corporate values of steel companies are still formed based on judgments relying on historical trends. For this reason, I believe there is still room for stock price growth in the Korean steel sector." Accordingly, Samsung Securities maintained a 'Buy' rating on Hyundai Steel and raised the target price by 9% to 85,000 KRW. The closing price the previous day was 51,500 KRW.

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