Korea Investment & Securities said that Poongsan's third-quarter results will fall short of market expectations (consensus), but it will be a temporary factor. With the defense industry's peak season and the continued strength in copper prices, the analysis is that the stock price is expected to rise in the long term. The target price remains 24,000 won, and the investment opinion remains "buy."
Poongsan's third-quarter operating profit is estimated at 64.0 billion won. This is up 87.8% from a year earlier. However, it is down 33% from the previous estimate of 94.0 billion won and falls about 20% short of the consensus of 78.8 billion won. Shipments at PMS, the U.S. copper processing subsidiary, were weaker than expected, and some revenue in the defense institutional sector was deferred to the fourth quarter.
Choi Moon-seon, an analyst at Korea Investment & Securities, said, "Since August, the United States has not applied a tariff to copper metal and has imposed a 50% tariff only on copper fabricated products," and added, "PMX should have increased profits because materials and supplies costs did not rise while product prices went up, but sales volume appears to have plunged due to the burden of higher product prices."
However, this impact is expected to be a temporary effect during the initial introduction of the tariff. Since exporters cannot absorb the full 50% tariff on copper metal, prices for copper and copper products are likely to rise later. In addition, the deferred defense revenue is expected to be realized in the fourth quarter and reflected in the annual results.
Choi added, "The fourth quarter is the peak season for defense, and the visibility of Middle East exports for domestic defense will also act as a positive for the stock price."