Eugene Securities assessed on the 26th that the capital expense, which cannot be confirmed numerically until a specific investment ratio is announced for Hyundai Steel’s plan to establish a steel mill in the U.S. with a recent investment of 8.5 trillion won, signifies uncertainty. It subsequently downgraded its investment opinion to 'Hold'. The target price remains at 30,000 won. Hyundai Steel's previous closing price was 27,450 won.
Previously, Hyundai Steel announced on the 25th that it plans to establish an electric steel mill in Louisiana, USA, with a target for commercial production in 2029. The investment scale is $5.8 billion (8.5127 trillion won). Regarding the capital structure, it plans to have a 50-50 ratio of self-financing to external financing, and it was announced that Hyundai Motor Group will co-invest at a level slightly exceeding the majority of self-financing.
Research Institute Yoo Jin of Eugene Securities noted that 'the specific equity investment ratio and details have not been finalized,' adding that 'until a specific investment ratio is announced, the capital expense that cannot be confirmed numerically signifies uncertainty,' thus downgrading the investment opinion to neutral.
The researcher evaluated that Hyundai Steel's investment in the U.S. is a meaningful investment given the multi-polarized era in the long term. The U.S. is a net importer of steel, and it is positive that the U.S. steel mill that Hyundai Steel is investing in can secure a captive market (Hyundai and Kia vehicle production and other OEM) from the start, especially since there is a 25% tariff on steel products produced within the U.S.
However, considering that Hyundai Steel's disclosure has not clearly established the investment structure or ratios, it is assessed that the market's reaction is rational, as it is not possible to estimate the financial burden at this time. Earlier, Hyundai Steel’s stock closed down 7%.
The researcher explained that, based on Hyundai Motor Group's statement that it will invest at a level exceeding the majority of self-financing, if 50% of the self-financing comes from Hyundai Motor, it would need to invest 2.125 trillion won, and the financial burden will vary according to Hyundai Steel’s share.
The researcher analyzed that although 'it was mentioned that a capital increase has not been considered, obtaining financing from external sources is also an issue,' as half of the investment must be raised from external capital, thus the corporate structure of the U.S. steel mill becomes important.
The researcher identified the anticipated price momentum for Hyundai Steel as ▲the spread of production cuts in China ▲the announcement of anti-dumping tariff investigations on hot-rolled and shaped steel ▲the confirmation of equity ratios for the U.S. steel mill.