[Click eStock] "Hyundai Steel, Q3 Earnings Disappoint... Target Price Down"

Shinhan Investment Corp. lowered the target price for Hyundai Steel to 43,000 KRW on the 26th, as its third-quarter earnings fell short of market expectations. The investment rating of "Buy" was maintained.

On the day, Park Kwang-rae, a research fellow at Shinhan Investment Corp., said, "Hyundai Steel's consolidated third-quarter results showed sales of 6.28 trillion KRW, down 12% from the previous quarter, and operating profit of 228.4 billion KRW, a 50.9% decline from the previous quarter. These figures fell short of market expectations of 6.35 trillion KRW in sales and 262.6 billion KRW in operating profit," adding, "the standalone operating profit also dropped 55.6% quarter-on-quarter to 189.3 billion KRW, failing to meet expectations."

The selling price per ton for blast furnace and electric furnace steel dropped by 45,000 KRW and 40,000 KRW respectively compared to the previous quarter. Although input costs decreased, the selling price declined more than the cost reduction, resulting in a narrowing spread for both blast furnace and electric furnace steel. The spread refers to the difference between the cost and the final product price. Park explained, "The spread trend did not deviate significantly from initial expectations, but the electric furnace sales volume of 1.494 million tons fell well short of estimates, triggering the poor performance."

In the fourth quarter, a decline in selling prices is expected again due to sluggish demand in downstream industries, similar to the third quarter. Although the decline may not be large, input costs such as iron ore and coking coal are rising, making a reduction in the blast furnace spread inevitable. For electric furnace steel, the stabilization of scrap steel prices is expected to cause input costs to fall at a level similar to selling prices. Park said, "amid diverging spread trends, sales volume is expected to rise to 4.99 million tons in the fourth quarter, driving improvements in sales and profits," adding, "The consolidated fourth-quarter forecast is sales of 6.88 trillion KRW and operating profit of 303.1 billion KRW, with fixed cost reductions playing a greater role than sales volume increases in profit improvement."

Meanwhile, Park noted, "The Standing Committee of China's National People's Congress has decided to issue an additional 1 trillion yuan (approximately 184 trillion KRW) in government bonds. This was an additional policy announced amid various economic stimulus measures by the Chinese government, including interest rate cuts and real estate regulation easing," adding, "This bond issuance decision could increase expectations for China's economic policies next year, potentially leading to market changes similar to those seen since November last year. The favorable winds from China may once again highlight Hyundai Steel's investment attractiveness."

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