Hanwha Investment & Securities said on the 19th that SeAH Steel posted weak results in the third quarter this year due to the impact of U.S.-driven tariffs and that it will take time for earnings to recover. The firm lowered its target price by 13.6% to 146,000 won from 169,000 won while maintaining a buy rating. The previous trading day's closing price of SeAH Steel was 121,300 won.
In the third quarter this year, SeAH Steel recorded separate revenue of 301.8 billion won, down 17.9% from a year earlier. It swung to an operating loss of 5.4 billion won.
Kwon Ji-u, a researcher at Hanwha Investment & Securities, said, "This is the result of one-off expenses being reflected at the same time amid weakness in both domestic demand and exports," and noted, "Even excluding one-off expenses, profitability in the export segment further declined as the 50% U.S. tariff burden took full effect."
In the domestic segment, the deficit widened due to weakened demand from a sluggish construction cycle, and operating loss was recorded as retroactive ordinary wage payments and inventory valuation losses were additionally reflected.
In the fourth quarter this year, separate operating profit of 9.5 billion won is expected, turning to a quarterly profit. As the one-off expenses concentrated in the third quarter disappear and new project revenue for offshore wind (OF) and liquefied natural gas (LNG) begins to be recognized from the fourth quarter, it is projected to contribute to operating profit.
Kwon said, "As the domestic segment exits the seasonal off-peak period, sales volume will increase, and both revenue and profitability will improve from the third quarter with attempts to raise selling prices."
However, with the impact of U.S. tariffs continuing, it is unclear whether earnings will recover to previous levels. Next year, the domestic segment is expected to improve gradually and modestly as the construction cycle bottoms out and recovers.
Kwon said, "It is necessary to check whether there are meaningful orders in the offshore wind and LNG segments, and whether OCTG (oil country tubular goods) profitability has not further deteriorated under the 50% tariff."