[Click eStock] "SeAH Steel, Domestic Steel Pipe Demand Expected to Rebound in Q2"

Cape Investment & Securities Report

[Asia Economy Reporter Minji Lee] Cape Investment & Securities on the 18th expressed expectations that demand for steel pipes will remain stable in both domestic and international markets for SeAH Steel, recommending a buy rating with a target price of 190,000 KRW.

SeAH Steel is experiencing strong sales of casing pipes due to an increase in rig count (number of shale well drilling rigs) in the North American region. In the fourth quarter of last year, sales reached 452.2 billion KRW and operating profit was 43.8 billion KRW, representing growth of 50% and 1930% respectively compared to the same period last year. This is the highest performance since the company’s split in 2018. Although steel prices showed weakness and the domestic spread slightly narrowed, demand and selling prices for U.S. casing pipes remained robust due to the soaring oil prices.

The company’s sales for the first quarter of this year are expected to reach 449.9 billion KRW and operating profit 44.1 billion KRW, increasing by 39% and 180% respectively compared to the same period last year. In the U.S., casing pipes continue to show steady price increases amid ongoing supply shortages. Researcher Lee Gyu-ik of Cape Investment & Securities stated, “While demand for U.S.-bound casing pipes remains strong, domestic demand is expected to be somewhat sluggish due to the off-season effect, and sales are likely to decrease compared to the previous quarter. However, domestic demand is expected to turn around starting in March, leading to favorable domestic sales in the second quarter.”

Operating profit is expected to increase compared to the previous quarter as relatively low-priced HRC was reflected in costs in the fourth quarter. The operating profit margin is predicted to remain solid around 10%. The researcher added, “Orders for steel pipes for LNG terminals and wind power substructures, which had been lacking, are expected to resume within the year.”

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