KB Securities noted on the 2nd that Poongsan is expected to see short-term performance improvement due to rising copper prices, along with long-term growth in the defense institutional sector. They maintained a 'buy' investment opinion and raised the target price from the previous 67,000 won by 19% to 80,000 won. The closing price of Poongsan on the previous trading day was 62,300 won.
Choi Yong-hyun, a researcher at KB Securities, said, "Poongsan's stock price has historically moved in line with copper prices," and added, "there has been an improvement in profitability due to the rise in copper prices in the short term." Concerns over the U.S. tariff imposed have increased demand uncertainty, leading copper futures prices to surge 26% since the beginning of the year.
However, the long-term growth factor is still the defense institutional sector, according to Choi. Choi stated, "Demand for ammunition in Europe remains strong, so Poongsan’s benefits from producing warheads will continue." According to the business report, the backlog of defense orders recorded 510.6 billion won in the fourth quarter of last year (October to December), showing a rebound.
Additionally, he projected, "With the completion of the 155mm expansion project approaching in the second half of this year, the likelihood of additional orders is high, and there is also potential for overseas investment to expand defense production capacity." Recently, Poland has been pursuing joint ventures with several countries for the production of 155mm shells, with Poongsan estimated to be among them.
KB Securities forecast that Poongsan will record 1 trillion won in sales and 55.2 billion won in operating profit in the first quarter of this year (January to March), which is expected to meet market projections (consensus) in terms of operating profit.
Researcher Choi analyzed, "The defense institutional sector is expected to see operating profit remain at a similar level to the previous year at 366 billion won due to deferred revenue recognition from the fourth quarter of last year and the effect of a strong dollar," adding, "Any additional expenses such as performance bonuses have already been reflected in the fourth quarter, so the likelihood of one-time factors occurring is low."