Hanwha Investment & Securities forecasted on the 25th that variables from China in the second half of the year and trade issues will lead to improved performance for Hyundai Steel. The target price is 50,000 won, and the investment opinion remains 'buy.' The closing price for Hyundai Steel on the previous trading day was 36,750 won.
Kwon Ji-woo, a researcher at Hanwha Investment & Securities, noted, "Expectations for profit improvement compared to the first half are high due to anti-dumping measures and production cuts in China in the second half," adding that "we are at the beginning stage of a recovery in the industry."
Specifically, the preliminary anti-dumping ruling announced the previous day regarding hot-rolled steel plates from Japan and China is positive. As the Trade Commission decided to propose a tariff of up to 33.57%, the inflow of low-priced imports distorting the domestic market is expected to ease, increasing the likelihood of normalizing prices for domestically produced products.
Additionally, there is a possibility of production cuts in Chinese steel in the second half of the year. Accordingly, despite the third quarter (July to September) being an off-season, it is analyzed by Kwon that demand will not decrease drastically from the lowest point of the first half.
However, Kwon pointed out that "the extent of the recovery in demand for rebar, which is directly affected by the slowdown in construction, needs to be monitored to see whether the effects of the new government's stimulus measures in the fourth quarter (October to December) become visible."
Hyundai Steel announced yesterday that its consolidated sales revenue for the second quarter (April to June) reached 5.9456 trillion won, with an operating profit of 101.8 billion won and a net profit of 37.4 billion won. Operating profit increased by 3.9% compared to the same period last year, and it achieved a turnaround compared to the previous quarter.
Kwon explained, "The increase in sales volume, having overcome the impact of the labor union strike in the previous quarter, was significant," adding that "especially, the improvement in spreads (profit) due to the decline in raw material prices and the increase in sales of automotive steel plates abroad led to an increase in profits for subsidiaries."
However, Hyundai Steel recorded an operating loss of 7.5 billion won on a separate basis, with the decline in selling prices for rebar products identified as a major cause due to the sluggish construction market.