Shin Young Securities reported that Posco International is experiencing significant diversification in its business portfolio, particularly in the energy and materials sectors, maintaining a 'buy' rating and a target price of 110,000 won.
Analyst Shin Hong-joo noted that Posco International achieved its highest-ever quarterly performance in the second quarter and is expected to continue stable growth in the second half, driven by its palm business in Indonesia and the expansion of its liquefied natural gas (LNG) operations.
Shin stated, "Despite increased macroeconomic volatility due to geopolitical risks, the company continues to generate high profits based on its diversified business portfolio. The current stock price does not fully reflect this performance strength."
Shin Young Securities analyzed that Posco International's operating profit for the second quarter rose 37% year-on-year to 429 billion won, marking its highest quarterly performance, which is 17% above market expectations.
The energy sector's operating profit increased by 52% year-on-year to 226 billion won, while the materials sector's operating profit also rose 32% to 205 billion won during the same period. Shin explained, "The steel sector recorded a loss of about 30 billion won due to the depreciation of the euro against the dollar, but the other divisions performed solidly, offsetting this loss."
Shin added that the performance in the energy sector was driven by the exchange rate increase in Myanmar's gas fields, cost recovery effects, and the stabilization of production in Australia’s Senex. He noted that despite the foreign exchange losses in the steel sector, other divisions performed well, and the Indonesian palm business also benefited from the integration of its subsidiary (PT.PAR) and rising international crude palm oil (CPO) prices.
Shin Young Securities forecasts that operating profit for the third quarter will increase by 17% year-on-year to 369 billion won. Shin mentioned, "While the cost recovery effects from Myanmar's gas fields are expected to diminish, improvements in power generation business performance are anticipated due to the peak demand season."
He also noted that the integration effects of the Indonesian palm business acquired at the end of last year will begin to be reflected this quarter, and the introduction of dedicated LNG vessels and long-term contracts with Cheniere in the U.S. will commence in the second half. He stated, "If the acquisition of upstream assets in the U.S. is completed within the year, it will contribute to the growth of the energy sector."
* This article has been translated by AI.
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