[Into the Stocks] Zinc Prices Rise and Smelting Fees Surge...Korea Zinc Takes Off

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[Asia Economy Reporter Hwang Yoon-joo] Expectations for Korea Zinc, whose stock price has risen again this year following last year, remain strong. As zinc prices and zinc benchmark treatment charges (TC) have significantly increased, operating profits are expected to rise, prompting the securities industry to bet on raising target stock prices.

According to the Korea Exchange on the 11th, Korea Zinc's stock price rose from 510,000 won at the beginning of the year to 628,000 won in the previous trading day. Despite net selling by institutions and individuals this year, foreigners have steadily bought with net purchases amounting to 158.57 billion won, resulting in a consistent upward trend.

The basis for raising the target stock price is the rise in zinc prices and TC. Zinc prices recorded $4,423 per ton (as of April 4), the highest price since December 2006. The price increase was influenced by supply disruptions caused by the surge in energy prices.

Moon Kyung-won, a researcher at Meritz Securities, said, "Zinc smelting consumes a high amount of electricity even within the metals market. If the sharp rise in oil and natural gas prices due to the Russia-Ukraine war is not easily resolved, zinc prices are unlikely to plummet from the current level," raising the fair stock price by 7.2% to 740,000 won.

In particular, the TC price was settled at $230 per ton, higher than the expected $200, which also acted as a positive factor. This price is a 45% increase from last year's $159 and will be reflected from the second quarter. Notably, the 'Escalator (price adjustment)' clause was reinstated in this negotiation. If zinc prices exceed $3,800 per ton, an additional 5% of the excess increase will be paid. Accordingly, the industry expects Korea Zinc to achieve record-high performance again this year following last year.

Lee Jong-hyung, a researcher at Kiwoom Securities, analyzed, "The annual operating profit improvement effect due to the rise in zinc TC is estimated at about 120 billion won (30 billion won per quarter). Compared to the existing quarterly operating profit estimate of 300 billion won for Korea Zinc, this raises expectations by about 10%."

New growth engines are also attracting attention. Korea Zinc plans to start commercial production of copper foil from October and is also discussing the establishment of a precursor joint venture with LG Chem. Copper foil (a material related to anodes) and precursors (intermediate materials for cathodes) are essential materials for electric vehicle batteries. According to the overseas market research firm IHS Markit, the electric vehicle battery market is expected to grow 25% annually and expand to 184 trillion won by 2025.

Kwon Soon-woo, a researcher at SK Securities, stated, "As growth materializes, the company's valuation will gradually increase. Reflecting favorable industry conditions, resulting profitability improvements, and additional growth factors, we raise the target stock price by 23.8% from the previous to 780,000 won."

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