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Hyundai Steel: 4Q20 Review: Short of Market Consensus by 42%

Posted on 29 January 2021

4Q20P consolidated OP of KRW55.4bn short of consensus by 42%

— Hyundai Steel posted 4Q20P consolidated revenue of KRW4.78tn (-1% YoY) and OP of KRW55.4bn (turn to black YoY; 1.2% OPM), stopping short of the market consensus (KRW95.9bn) by 42% and our estimate (KRW68.8bn) by 20%.

— Standalone revenue/OP came in at KRW3.99tn (-11% YoY)/KRW35.5bn (+5% YoY; 0.9% OPM). 

— The company’s shares were down 4% on Jan 28, underperforming the KOSPI by 3% YTD.   

One-off costs stemming from collective bargaining undermined earnings

— The earnings shortcoming was largely attributable to KRW40.0bn in one-off costs stemming from collective wage bargaining.

— Steel ASP landed at KRW780k (-8% YoY) with a total of 5.08m tons sold (-1% YoY).

— Revenue from blast furnaces was KRW2.31tn (+3% YoY) and electric furnaces KRW1.68tn  (-11% YoY).

— Downstream-industry woes (e.g., auto, shipbuilding) undermined ASP and sales volume, but demand maintained its uptrend in 2H20.

— NP plunged on an impairment loss of KRW100.0bn arising from halted operations for thin-sheet and color-plate plants and KRW90.0bn in fines imposed on the company for fixing steel scrap prices. 

2021 guidance: Sales volume to slide 2% YoY

— 2021 sales volume guidance has been set at 19.34mn tons (-2% YoY; blast furnaces -1% YoY; electric furnaces -3% YoY).

— Output and sales will normalize as the global economy recovers. Profit margins will also improve thanks to the removal of underperforming business segments.

— Profit margins dropped YoY in 1H20 as capacity utilization rate plummeted because of the shutting down of overseas facilities. 

— The company will invest KRW340.0bn in ESG-related CDQ facilities until 2024. 

Source : Business Korea