Poongsan Results Fall Short of Expectations... Where Is the Room for Improvement? [Click e-Stock]

Third-quarter results expected to fall short of expectations
Metal gains lower than expected
Defense revenue also deferred to Q4

Poongsan is expected to post third-quarter results this year that fall short of market expectations. The shortfall is attributed to lower metal gains in its copper processing division and deferred revenue in its defense division. Nevertheless, analysts say structurally strong copper prices and solid ammunition demand could lift results again.

On October 8, SangSangin Securities maintained its 90,000-won target price and “Buy” rating for Poongsan, citing these factors. The previous day's closing price was 68,000 won.

Operating profit for the third quarter is estimated at 89.3 billion won on a consolidated basis. That would be down 28.7% from the previous quarter and well below the market consensus of 113.3 billion won. The main reasons cited for the expected shortfall are lower metal gains in the copper processing division and deferred revenue in the defense division.

SangSangin Securities estimates operating profit in the copper processing division at 24.1 billion won, a 78.3% drop from the previous quarter. It expects the benefit from the exceptionally large metal gains in the first half to fade, despite rising copper prices since July. The defense division is expected to be significantly affected by deferred deliveries due to delays in acceptance testing and uncertainty over passage through shipping routes. Revenue from domestic sales and exports combined is forecast to reach just 351.7 billion won, below the previous target.

The reason results are expected to fall short of expectations is simple: expectations were high. From late June through September, the London Metal Exchange (LME) spot price of copper rose steadily by about 9.1%. Inventories outside the United States have fallen amid regional shifts in supply and demand, driven by concerns over tariffs on copper products by the Trump Administration and ongoing production disruptions at major mines and smelters, as well as uncertainty over passage through the Strait of Hormuz.

“Expectations for strong first-half metal gains and rising copper prices served as catalysts for expectations for second-half results and the share price,” said Kim Jinbeom, an analyst at SangSangin Securities. “As the direction of price indicators diverges from actual metal gains, an adjustment to expectations for third-quarter results is inevitable.”

The performance of the defense division in the second half will hinge on defense orders deferred to the fourth quarter. However, solid ammunition demand is seen as a positive factor, as global supply constraints for propellants and explosives persist. Although there is some pressure from raw-material procurement costs, the company is in a position to respond by raising selling prices.

This content was produced with the assistance of AI translation services.