[Click eStock] POSCO Q1 Operating Profit Expected to Shrink...Target Price Downgraded

[Asia Economy Reporter Hwang Yoon-joo] Yuanta Securities maintained a 'Buy' rating on POSCO on the 3rd but lowered the target price to 460,000 KRW, citing a sharp rise in coking coal prices and an expected decline in the average selling price (ASP) of carbon steel.

Researcher Lee Hyun-soo of Yuanta Securities stated, "Due to the weak carbon steel spread, a reduction in operating profit (separate) in Q1 2022 compared to Q4 2021 is inevitable."

He added, "In particular, the sharp rise in coking coal prices will burden Q1 costs," explaining, "Initially, we expected iron ore and coking coal prices to weaken in Q1 2022, but due to climatic factors (heavy rains) in countries where major mines such as Australia and Brazil are located, as well as the resurgence of COVID-19, iron ore and coking coal prices are showing strength."

Additionally, he forecasted a decline in carbon steel ASP, noting, "The prices of domestic steel products in China, which weakened in Q4 last year, are affecting selling prices from Q1."

He continued, "In terms of volume, due to the shutdown of Pohang No.1 blast furnace at the end of 2021 and the refurbishment of Gwangyang No.4 blast furnace scheduled between February and June, quarterly sales volume in the first half of the year is estimated to be limited to 8.4 to 8.5 million tons."

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