[Click eStock] Hyundai Steel, Chinese Demand Revives

[Asia Economy Reporter Junho Hwang] KB Securities maintained the target price of Hyundai Steel at 67,000 KRW on the 2nd. This target was presented based on expectations of demand recovery following the easing of China's COVID-19 lockdown measures.

KB Securities forecasted that Hyundai Steel's sales in the second quarter of this year would increase by 37.9% year-on-year to 7.8 trillion KRW, and operating profit would rise by 44.1% to 785.5 billion KRW. Supported by robust demand from upstream industries, steel product sales volume in the second quarter is expected to expand by 3.1% compared to the same period last year. Additionally, price increases in automotive steel sheets and shipbuilding thick plates (expected 150,000 KRW and 100,000 KRW per ton, respectively) and a 7.2% rise in rebar distribution prices in the first half of this year are expected to have driven the average selling price (ASP) up by 35.7% in the second quarter. Accordingly, it is estimated that most of the cost increases were offset.

In particular, the pace of recovery in China's steel demand is expected to be closely monitored going forward. China's steel prices showed weakness in the first quarter of this year due to lockdowns in major cities caused by COVID-19. However, recent easing of lockdowns and expanded government stimulus policies have raised expectations for a recovery in steel demand.

Researcher Haejung Jeong of KB Securities analyzed, "Risk factors to the positive investment opinion on Hyundai Steel include the continued rise in raw material prices, delayed recovery from COVID-19 in China, sluggish steel demand due to global financial tightening, and deterioration of steel supply and demand caused by increased crude steel production in China."

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