Korea Investment & Securities said on the 3rd that Poongsan posted a recoverable earnings shock and that the investment points were not damaged at all. It maintained its "Buy" rating. However, reflecting continued weak results, it lowered the target price to 176,000 won from 204,000 won. The previous trading day's closing price of Poongsan was 110,000 won.
Poongsan posted 42.6 billion won in operating profit on a consolidation basis for the third quarter of this year (July–September), falling 46.6% short of the market consensus (80 billion won). It also decreased 42% from a year earlier.
Choi Moon-seon, an analyst at Korea Investment & Securities, said, "PMX, the U.S. production subsidiary expected to benefit from U.S. tariff policy, instead recorded a loss, which was the main cause of the earnings shock," adding, "Other factors include higher production costs, sluggish shipments, and deferred defense sales, but these were already reflected in the outlook."
The poor performance of subsidiary PMX was largely affected by the surge and plunge in copper prices. As U.S. tariffs were anticipated, copper prices jumped in July, which raised materials and supplies purchase expenses in August. But when copper was excluded from tariff coverage, U.S. copper prices plunged, resulting in an inventory loss (8.5 billion won).
A 50% tariff was imposed on copper fabricated products starting in August, and with product prices in August added on top of the higher copper price, customer orders plunged. As a result, the PMZ spread actually fell, Choi explained.
Choi said, "Customers for copper fabricated products have run down their inventories, and with copper prices continuing to rise on supply-demand conditions, it is no longer feasible to delay purchases," adding, "As PMX's shipments normalize and the temporary impact of copper's sharp swings fades, the expected benefits from U.S. tariff policy will begin."
Choi added, "The weak results are already priced into the stock," and said, "We judge that the investment points have not been damaged at all. Defense sales have only been deferred, and copper prices will rise through the first half of next year following seasonal demand."