"Hyundai Steel: Disappointing Results but Steel Price Outlook Positive... Target Price Raised" [Click e-Stock]

On April 28, Mirae Asset Securities maintained its "Buy" rating on Hyundai Steel, raising its target price from 41,000 won to 55,000 won. The brokerage cited expectations for rising prices of major steel products, despite disappointing first-quarter results.

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According to Hyundai Steel's preliminary consolidated results for the first quarter, the company posted sales of 5.74 trillion won, up 3.2% year-on-year, and an operating profit of 16.4 billion won, turning a profit. However, operating profit fell short of the market consensus of 44.3 billion won. While sales volume increased by 6% quarter-on-quarter due to improved supply-demand balance and expanded exports, operating profit decreased by 63.7% over the same period, mainly due to higher raw material costs and a stronger exchange rate.

Despite results falling short of market expectations, Mirae Asset Securities projected that the effect of rising prices for key steel products would drive further improvement in Hyundai Steel's performance. Kim Giryong, a research analyst at Mirae Asset Securities, explained, "The reduction in inflows of low-priced imports due to anti-dumping rulings, destocking in distribution channels, and price hikes by steelmakers are all contributing to higher steel product prices. For example, as of the end of this month, the import distribution price for hot-rolled steel is 900,000 won per ton, up 14% from the first-quarter average."

Kim added, "Despite cost pressures from raw materials, a strong won-dollar exchange rate, and rising logistics expenses, the upward trend in steel prices is expected to be the main driver of improved results quarter-on-quarter. We estimate that overall sales volume in the second quarter will also increase by 6% compared to the first quarter, supported by seasonal demand and continued growth in section steel exports."

Hyundai Steel is also expected to benefit from increased sales volumes driven by investments from Hyundai Motor Group in the semiconductor, Saemangeum, Global Business Complex (GBC), and Bokjeong Research Complex projects. Additionally, Kim pointed to several new drivers of demand, including a package strategy targeting data centers, high-performance structural steel to meet demand for ESS (enclosures that protect power control systems from external environments), and the establishment of response systems to meet the government's expansion of power grid infrastructure.

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