April 26, 2024

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[THE INVESTOR] POSCO largely beat market expectations in the first quarter but the steel industry is past its peak, said Daishin Securities on April 19, maintaining a “market perform” rating and 300,000 won (US$263.11) target price. 

Its flagship steel division propelled the earnings surprise but all other sectors also performed better than expected, said analyst Lee Jong-hyeong. 

Korea Investment and Securities echoed the analysis, adding that its subsidiaries, which have dented the return on equity for the past two years, have begun to bolster POSCO and will improve further. 

Although it is difficult to tell how sustainable it is, the likelihood of stock reevaluation has risen, said analyst Choi Mun-seon, maintaining a “buy” recommendation and 365,000 won target price. 

KB Investment and Securities was more optimistic, upgrading the rating to a “buy” from a “neutral” and raising the target price to 320,000 won from 300,000 won. 

The uptick will become more prominent in the second quarter, in the construction sector in particular, said analyst Lee Jae-won. POSCO has suffered 170.6 billion won operating loss in the sector in the second quarter last year, reflecting a major loss from building a steel factory in Brazil, explained the analyst. 

In tandem with the rise in operating profit ratio and return on equity, its cashable assets seem to have increased as well, raising expectations for higher dividends, noted Lee. 

By Hwang You-mee (glamazon@heraldcorp.com)