Hanwha Investment & Securities said on the 15th that, as recent reports about a sale of Poongsan's defense business were wrapped up with a cancellation filing, it is necessary to focus more on the direction of earnings. It kept its target price at 147,000 won and its "buy" rating. Poongsan's closing price in the previous session was 100,700 won.
For the first quarter of this year, Poongsan's consolidated revenue is estimated at 1.345 trillion won and operating profit at 88.4 billion won. That represents increases of 16.3% and 26.8%, respectively, from a year earlier.
Kwon Ji-woo, an analyst at Hanwha Investment & Securities, said, "While the wrought copper institutional sector's metal gain (the difference between selling and purchase prices) effect from higher copper prices is being reflected above market expectations, the defense institutional sector tends to see exports concentrated in the second half, making first-quarter revenue and profit contributions the smallest of the year."
The wrought copper institutional sector's sales volume is expected to be about 44,000 tons (t), a slight decrease from the previous quarter. However, as copper prices exceed $12,000 per ton, the metal gain effect is expected to be reflected in a concentrated manner.
Kwon said, "The wrought copper operating profit margin (OPM) is expected to show unusually high profitability, but from the second quarter it is likely to stabilize lower as the metal effect normalizes."
Hanwha Investment & Securities projected that, toward the second half, the effect of a higher share of defense exports and revenue concentration will kick in in earnest. Kwon said, "Defense revenue is estimated at 405 billion won in the third quarter and 485 billion won in the fourth," adding, "An improved export mix is expected to be a key pillar of margin recovery."
He added, "Given higher exchange inventories and slowing Chinese imports, copper prices may move in a short-term box range, and it will be difficult to sustain metal gains at the same level as in the first quarter."