[Click eStock] "POSCO, a 4th Quarter with No Earnings Worries"

[Asia Economy Reporter Ji-hwan Park] Yuanta Securities maintained a 'Buy' rating and a target price of 530,000 KRW for POSCO, stating that it is expected to record strong performance in the fourth quarter as well.

Hyunsoo Lee, a researcher at Yuanta Securities, said, "The consolidated operating profit for the fourth quarter is expected to increase by 221% year-on-year to 2.77 trillion KRW," adding, "On a separate basis, the carbon steel selling price is expected to continue rising following the previous quarter, but the increase in raw material input costs is expected to be greater, resulting in a narrower spread." Additionally, the combined operating profit of the overseas steel division is expected to slightly decrease compared to the previous quarter, and with the energy sector entering its off-season, the consolidated operating profit is projected to decline by 11% quarter-on-quarter.

At the end of last year, China's MIIT (Ministry of Industry and Information Technology) stated that the country's crude steel production in 2021 should not exceed that of 2020. The cumulative crude steel production from January to November 2021 decreased by 2.6% year-on-year, making this statement likely to materialize, according to the researcher. Although there has been no specific mention yet regarding the 2022 crude steel production level, the steel industry has been given a target to reduce energy consumption per ton of steel produced by 2% from the current level. Lee said, "A reduction in energy consumption does not necessarily mean a decrease in steel production, but it is expected that the Chinese steel industry will strive to meet the government's carbon reduction goals in the future."

Although many companies carried out physical spin-offs this year for various purposes, investor reactions were not favorable. A physical spin-off itself does not change corporate value, but the issue of re-listing after the spin-off is inevitably perceived negatively from an ESG perspective.

Lee said, "POSCO's recent spin-off decision is not aimed at expanding the major shareholder's stake, and the company has also dismissed concerns about subsidiary re-listing," adding, "While the company's intentions cannot be blindly trusted, it is also necessary to be cautious about viewing the situation negatively based solely on other companies' cases."

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