[Click eStock] "Hyundai Steel, Possible Profit Growth in 2Q... China Market Conditions Remain a Prerequisite"

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[Asia Economy Reporter Hwang Yoon-joo] Meritz Securities evaluated on the 27th that Hyundai Steel is likely to achieve strong performance in the second quarter as well, supported by the expansion of seamless steel pipe demand, excluding the sluggish demand in China. Accordingly, they maintained a 'Buy' investment rating and a target price of 67,000 KRW.

Moon Kyung-won, a researcher at Meritz Securities, stated, "The consolidated operating profit for the first quarter (697.4 billion KRW) exceeded consensus," adding, "Notably, the profitability improvement of consolidated subsidiaries contributed approximately 40 to 50 billion KRW to the surprise."

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Researcher Moon analyzed, "It appears that the profitability of overseas SSC (Steel Service Center) has increased sharply. The profit increase of the American subsidiary due to the surge in seamless steel pipe prices is estimated to have driven the overall performance improvement."

He forecasted that the strong performance of overseas SSC would continue into the second quarter. Researcher Moon predicted, "Additional profit increases are expected in the second quarter, supported by the expansion of seamless steel pipe demand."

He also explained, "Automotive steel sheets for major customers, scheduled to be completed in the second quarter, are progressing more favorably than expected," adding, "Although it will not be possible to fully pass on the rise in raw material prices, a price increase of about 150,000 KRW per ton is highly likely."

Researcher Moon assessed, "There is sufficient potential to outperform the market returns depending on the automotive market situation, and the reduction of borrowings through the sale of non-core assets such as the Seongsu-dong site is also positive."

He added, "The consolidated operating profit for the second quarter is forecasted to increase by 24.5% compared to the first quarter, reaching 868 billion KRW."

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