iM Securities said on the 15th that, although inflation concerns raising the possibility of tightening do not create a favorable environment for Korea Zinc's share price, it expects a firm trend amid the spread of "resource nationalism." It maintained its Buy rating and recommended the stock as the top pick in the sector, but lowered the target price to 1.7 million won from 1.95 million won. Korea Zinc's previous closing price was 1,201,000 won.
Materials corporations like Korea Zinc tend to see commodity prices rise when expected inflation increases with an economic upturn or when the dollar weakens, leading to strong earnings and upward valuation revisions.
Therefore, the current period, in which supply shocks have sparked inflation concerns and raised the likelihood of tightening, is not a favorable environment for the share price.
Even so, iM Securities said it recommends Korea Zinc as the top pick in the sector.
Kim Yunsang, an analyst at iM Securities, said, "First, despite the unfavorable macro environment, due to supply disruptions and the spread of resource nationalism, prices of major nonferrous metals such as zinc, lead, nickel, aluminum, and rare metals are expected to show a firm trend, unlike steel."
It also assessed the recent surge in the won-dollar exchange rate as a positive factor. Kim explained, "If the exchange rate rises by 10 won, Korea Zinc's operating profit increases by 15 billion won."
It was also projected that, thanks to such firm metal prices and the sharp jump in the exchange rate, historically high and robust results will continue for the time being. Lastly, it assessed that the company has strategic value as a producer of rare metals.
Kim explained, "Its strategic standing as a future core mineral producer will become more solid."