[Click eStock] "Hyundai Steel Raw Material Prices Soared, but... Environment Allows Price Increase"

[Asia Economy Reporter Lee Myunghwan] Daishin Securities announced on the 6th that it maintains a Buy rating and a target price of 58,000 KRW for Hyundai Steel. This is due to the possibility of price increases despite a significant rise in raw material costs.

Daishin Securities projected Hyundai Steel's consolidated sales for the first quarter to be 6.6845 trillion KRW, a 35.7% increase compared to the same period last year, and operating profit to be 548.7 billion KRW, an 80.5% increase year-on-year. The operating margin is expected to rise by 2.0 percentage points from last year to 8.2%. Sales are 13% higher than market expectations, but operating profit is 9.4% lower.

First-quarter sales volume is estimated to be around 4.75 million tons. This reflects delays in normalizing automobile volumes due to semiconductor supply shortages and partial suspension of operations at the Dangjin plant following a major accident in March. Daishin Securities analyzed that the price increase trend for sheet and long products, which became evident from March, will continue.

The sharp rise in raw material prices in the first quarter is expected to be fully reflected in the second and third quarters. Hyundai Steel has a high sales proportion of automotive steel plates, which are likely to see price increases, making margin defense relatively easier. For long products, expectations of entering the peak season and increased construction starts after the presidential election have been formed. Although Korea Special Steel, a structural steel producer, is about to enter the rebar market, its impact is expected to be limited as its target customers differ from those of Hyundai Steel.

Lee Taehwan, a researcher at Daishin Securities, analyzed, "Although the sharp rise in coking coal prices burdens margin reduction in the blast furnace segment, the electric furnace segment can improve margins based on a comfortable business environment," adding, "Profitability-focused business operations will continue."

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