[Click eStock] "POSCO to Maintain High Profitability This Year as Well"

Hana Financial Investment Report

[Asia Economy Reporter Minji Lee] Hana Financial Investment maintained its buy rating and target price of 500,000 KRW for POSCO on the 7th, expecting the company to sustain a high level of profitability this year as well.

POSCO's standalone sales and operating profit for the fourth quarter are projected to reach 11 trillion KRW and 1.6 trillion KRW respectively, representing growth of 56% and 210% compared to the same period last year. Although the operating profit is the fifth highest on a quarterly basis, it is expected to slightly miss the market estimate of 1.8 trillion KRW.

The limited increase in selling prices was offset by a significant rise in raw material input costs. Due to the price maintenance policy for major sheet products starting in October, the average selling price of carbon steel is expected to increase by only 7,000 KRW per ton. Meanwhile, raw material input costs are expected to rise by 65,000 KRW per ton, leading to a contraction in the spread. Additionally, shipment disruptions caused by the Cargo Solidarity Union strike in December are expected to result in sales volume falling short of initial estimates, reaching only 8.36 million tons.

High profitability is predicted for the first quarter of this year. Since low-cost raw materials have been used following the sharp decline in iron ore prices in the second half of last year starting December, raw material input costs are expected to significantly decrease in the first quarter. Researcher Seongbong Park of Hana Financial Investment stated, “Considering the decline in import prices of Chinese steel products in the second half of last year, domestic blast furnace companies are expected to lower prices for major sheet products in the first quarter. However, given the steady domestic demand for sheet products mainly for shipbuilding and automobiles and the anticipated decrease in Chinese imports, the possibility of price reductions exceeding the drop in raw material costs is limited.”

Researcher Park added that excessive concerns about a peak-out in earnings should be avoided as high operating profits are expected to continue in the first half of this year. He explained, “It is also important to keep in mind that the company is strengthening shareholder-friendly policies by announcing treasury stock cancellations following the acquisition of treasury shares worth about 1 trillion KRW last year,” adding, “The current stock price is only 0.5 times the PBR.”

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