South Korea’s largest steelmaker Posco has become a strong buy as capacity streamlining in China and a pickup in global economy prop up its earnings and business outlook.
Analysts are now betting the steelmaker to end the year at its six-year best with its full-year profit nearing 5 trillion won ($4.4 billion).
Shinhan Investment Corp. revised up the forecast for Posco’s consolidated profit for this year to 4.78 trillion won, up 68.1 percent from last year’s 2.84 trillion won.
Posco’s second-quarter results beat market expectations despite narrowed profit margin from spike in raw material prices. Its operating profit in the second quarter soared 44.2 percent on year to 979.1 billion won, down 28.3 percent from the previous quarter but higher than market estimate by 56.3 billion won. In the first quarter, it posted a profit of 1.37 trillion won, its best performance since the second quarter of 2011.
It has largely benefited from infrastructure spending in the world’s largest steel market, China, where supply turned tighter from reduced inventories that further stoked prices.
According to global steel industry observer CRU and China-based steel industry news site Mysteel, China’s steel inventory level dropped from 16.4 million tons in February to 9.2 million tons in July. Prices of hot-rolled steel there went up from $464 per ton in May to $578 in July.
Kiwoom Securities Co. forecast Posco’s third-quarter operating profit to near the first-quarter income by reaching 1.18 trillion won, which would be up 14 percent from the year-ago period. Sales are estimated at 15.4 trillion won in the quarter that ends in September, up 20.6 percent on year.
Posco shares finished Wednesday at 339,500 won, up 2,000 won or 0.59 percent from the previous session.
By Ko Min-suh
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