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(Photo= Yonhap news) |
[Alpha Biz= Reporter Kim Sangjin] Yuanta Securities reported on September 26 that Hyundai Steel (004020) is experiencing declining profitability due to persistent weak demand. However, they noted potential for profitability improvement next year as a result of a rebound in bar steel prices and restructuring of its operations in China. They maintained a "Buy" rating with a target price of 43,000 won, indicating a potential upside of 60%, based on the previous closing price of 26,800 won.
Yuanta pointed out that domestic shipments of major bar steel products from January to July this year have decreased by 18% for rebar and 22% for H-beams compared to the previous year. While the H-beam segment, which has a relatively higher export proportion, is mitigating overall shipment declines through increased exports, it is still facing weaker profitability compared to domestic sales.
The report highlighted that rebar, with its overwhelmingly high domestic focus, struggles to respond to export demands. The weak demand in both residential and commercial real estate is negatively impacting Hyundai Steel's profitability.
Despite solid sales of cold-rolled products driven by strong demand from the automotive sector, Yuanta noted that sales of hot-rolled plates are facing challenges due to intensified competition with imported products, making it difficult to increase volumes. The prices of these products and their spreads (the difference between product prices and raw material costs) are significantly influenced by the Chinese market, which has seen fluctuations but overall weakened since the second half of 2021, leading to declining profitability.
AlphaBIZ Kim SangJin(letyou@alphabiz.co.kr)
