Hyundai Steel Pohang Plant. /Courtesy of Hyundai Steel

Hana Securities expects that Hyundai Steel's performance will improve significantly starting in the third quarter (July to September) of this year. Hana Securities has maintained a 'buy' investment opinion on Hyundai Steel and raised its target price to 50,000 won.

Park Seong-bong, an analyst at Hana Securities, estimated that Hyundai Steel recorded 5.9 trillion won in consolidated sales and 81 billion won in operating profit for the second quarter (April to June) of this year. This falls below the market expectation of 111 billion won in operating profit.

Analyst Park noted, "The average selling price (ASP) of electric products decreased in the second quarter, while raw material prices increased, which is expected to have reduced the spread (the difference between raw material prices and final product prices) by about 40,000 won per ton, and the expansion of fixed costs due to major repairs at the plate factory negatively impacted the results."

Analyst Park projected that the spread would widen again starting in the third quarter, leading to an improvement in performance. The institutional sector for section steel continues to see a reduction in production. Hyundai Steel has suspended operations at its Pohang Plant No. 2 indefinitely since last month, and the Dangjin Plant is also expected to undergo major repairs until mid this month. The Incheon rebar plant, which had previously halted operations in April, also decided to be non-operational for a month starting from the 12th of this month.

Analyst Park added, "Not only Hyundai Steel but also other steelmakers are participating in the production cuts," and noted that "the domestic rebar distribution price has turned upward since mid last month." He further mentioned, "Considering this, we expect the widening of Hyundai Steel's section steel spread and improvement in profitability in the third quarter."

Analyst Park also expects that the profitability of the plate sector will improve due to the interim anti-dumping duties imposed on Chinese hot-rolled products since the end of April. In particular, preliminary anti-dumping judgments regarding Chinese and Japanese hot-rolled products are expected to be announced by July, and depending on the outcomes, an increase in hot-rolled product sales in the fourth quarter (October to December) can be anticipated.

Analyst Park stated that "Hyundai Steel's performance improvement is possible due to strengthened import regulations on Chinese products, a decline in the won-to-U.S. dollar exchange rate, and enhanced profitability in section steel from the third quarter onward," and added that "there is a high likelihood that the Chinese government will announce policies for the restructuring of the steel industry by the end of the year, which could serve as a bullish factor for stock prices if realized."

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