[Click eStock] Hyundai Steel, Profitability Expected to Improve from Q2

[Asia Economy Reporter Lee Seon-ae] Hana Financial Investment announced on the 5th that it maintains a buy rating and a target price of 70,000 KRW for Hyundai Steel. Although profitability is expected to deteriorate in the first quarter due to price declines, positive effects from aggressive price increases are anticipated starting from the second quarter.

Park Seong-bong, a researcher at Hana Financial Investment, emphasized, "Despite expectations for profitability improvement, the current stock price is undervalued as it is only at a price-to-book ratio (PBR) of 0.3 times (expected ROE of 8.8% in 2022)."

Hana Financial Investment forecasted that Hyundai Steel's standalone sales and operating profit for the first quarter of 2022 will reach 6.1 trillion KRW (YoY +44.6%, QoQ +7.4%) and 544.9 billion KRW (YoY +83.7%, QoQ -26.3%), respectively.

However, profitability improvement due to spread expansion is expected from the second quarter. For long steel products, it is anticipated that price increases reflecting the rise in scrap metal prices will be possible in the second quarter thanks to steady demand. Global steel prices are sharply rising due to supply disruptions caused by Russia's invasion of Ukraine and the strong prices of steel raw materials and energy.

Researcher Park stated, "With the EU's full-scale ban on imports of Russian steel products, exports to Europe from Turkey, India, and other Asian countries are expected to expand, along with a simultaneous rise in domestic steel prices. Hyundai Steel is also expected to implement aggressive price increases." He added, "Considering that last month Nippon Steel raised the price of automotive steel sheets for Toyota by 20,000 yen (approximately 200,000 KRW) per ton, a meaningful price increase is expected for automotive steel sheet sales prices to domestic automakers as well."

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