[Click eStock] "Pungsan, Defense Industry Boom and Copper Price Rise Add Appeal"

Kiwoom Securities Report

[Asia Economy Reporter Minji Lee] On the 29th, Kiwoom Securities issued a buy rating and a target price of 50,000 KRW for Pungsan. They judged that the investment appeal is high as the defense business division continues to perform well and the pressure of rising copper prices is increasing.

In the third quarter, Pungsan recorded a consolidated operating profit of 80.8 billion KRW, a 67% increase compared to the same period last year. This figure significantly exceeded the market expectation of 67.8 billion KRW. Jonghyung Lee, a researcher at Kiwoom Securities, said, “Despite the weakening of the inventory effect due to rising copper prices and the profitability of the non-ferrous metal business declining compared to the second quarter, the profitability of the defense business is estimated to have improved significantly more than expected due to strong defense exports to the U.S. and the Middle East.”

Defense exports, which had sharply contracted since 2018, have been rapidly improving since last year due to recovery in the U.S. and Middle Eastern markets. Although there were concerns that growth might slow down in the second half of this year, volume growth and profitability improvements have continued.

The total operating profit of consolidated subsidiaries was 15.2 billion KRW, down from 25.8 billion KRW in the second quarter. As copper prices weakened after peaking in the second quarter, the profitability of PMX, the U.S. non-ferrous production subsidiary, declined, but the performance of PAC, the U.S. defense sales subsidiary, is estimated to have been better than expected.

Recently, following China, Europe’s power shortages and production disruptions have emerged as new variables affecting non-ferrous metal prices. Copper prices rose to $10,460 per 3-month futures contract in early May, breaking historical highs, then fell to the high $8,000s in September. However, concerns over production disruptions due to Europe’s power shortages caused a rebound to $10,281 on the 15th, threatening historical highs again.

Researcher Jonghyung Lee explained, “It is highly likely that power shortages in China and Europe will continue until the heating season in the first quarter of next year, and China’s economic momentum, which was sluggish after the second quarter, is also likely to stabilize from the fourth quarter of this year. There is a sufficient possibility that copper prices will rebound again around the end of this year to early next year.”

Considering the third-quarter performance and recent copper prices, the operating profit and net profit attributable to controlling shareholders forecasts for this year have been revised upward by 6% and 8%, respectively, compared to previous estimates. The annual operating profit for this year is expected to reach 300.2 billion KRW, surpassing the previous record high of 241.1 billion KRW in 2017.

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