[Click eStock] "Dongkuk Steel, Profitability Improvement Expected in First Half"

Price Increase for Color Coated Steel and Heavy Plates from January
Operating Profit Expected to Fall Short of Last Year's Q4 Forecast

[Asia Economy Reporter Hwang Yoon-joo] Shinhan Investment Corp. forecasted on the 17th that Dongkuk Steel’s Q4 earnings would fall short of market expectations. However, profitability improvement is expected in the first half of this year. Accordingly, the investment opinion 'Buy' and the target price of 19,000 KRW were maintained.

Minwoo Choi, a researcher at Shinhan Investment Corp., stated, "The consolidated operating profit for Q4 last year decreased by 14% compared to the previous quarter to 127.3 billion KRW," adding, "It is expected to fall short of market expectations."

Researcher Choi explained, "The decline in selling prices and the resulting spread contraction will be the main factors behind the poor performance."

Q4 sales volume is expected to increase by 6.7% from the previous quarter to 1.5 million tons. Sales of long products and heavy plates are expected to increase compared to both the previous quarter and the same period last year, but cold-rolled products are expected to remain at the previous quarter’s level due to sluggish demand in key downstream industries such as home appliances and construction.

Profitability improvement is expected in the first half of this year as price increases began in January. Researcher Choi analyzed, "Price increases are being implemented for major products such as color steel sheets, heavy plates, and general steel products to partially offset profitability deterioration," adding, "Profitability in the first half of this year is expected to improve significantly compared to the second half of last year."

However, he pointed out, "Due to seasonal factors, sales volume in Q1 will not be high, so the absolute profit improvement is expected to be more prominent in Q2."

Assuming no rapid improvement in the construction and home appliance industries, sales volume in 2023 is likely to remain at the 2022 level. The consolidated operating profit for 2023 is estimated at 642.1 billion KRW, a 17.2% decrease compared to the previous year.

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