The Higher 'Dr. Copper' Prices Rise, the More 'This Company' Smiles [Weekend Money]

Poongsan's valuation appeal rises as copper prices climb
Defense earnings also expected to rebound in the second half of the year

Amid rising copper prices due to supply shortages driven by demand from artificial intelligence (AI), Poongsan has been named the domestic company expected to benefit the most. Analysts say that if copper prices continue to rise, the stock's valuation appeal will improve despite its recent weak performance.

"If we factor in the outlook that copper prices will continue to rise, the stock's valuation becomes more attractive," said Choi Moon-sun, an analyst at Korea Investment & Securities. "The stock of Korea's leading beneficiary will not remain in its current de-rated state as prices rise. This is an attractive time to invest."

The London Metal Exchange (LME) price of copper averaged $14,104 per metric ton in the third quarter and has remained in the $14,000-per-ton range so far this month. In September, it reached a record high of $14,912 per metric ton. Several factors have contributed to the rise in copper prices. Concerns over U.S. tariffs on copper have increased price volatility, while production disruptions, including strikes at major mines, and concerns about reduced copper supply from China have also played a part. "Assuming the United States does not finalize tariffs on copper before year-end, we forecast an average copper price of $14,780 per metric ton in the fourth quarter," said Park Sung-bong, an analyst at Hana Securities.

Against this backdrop, analysts widely expect strong earnings to continue in Poongsan's copper processing business. "For Poongsan's copper processing business, price direction matters more than the absolute level of copper prices," said Baek Jae-seung, an analyst at Samsung Securities. "We believe the tight supply of copper concentrate is due to the structural factor of declining ore grades. Combined with the weak-dollar trend, this should support continued strong results in Poongsan's copper processing business whenever prices move upward."

Poongsan's stock has recently been weak amid concerns that it may sell its defense business, one of its core businesses. Its first-half results were also lackluster. However, Choi expects both the defense division's results and the stock to rebound in the second half of the year. "The weak first-half results were caused by external factors, not internal issues such as problems specific to the company or a loss of competitiveness," he said. "The recovery is not far off, and we expect it to happen in the second half of this year. Because defense supply contracts are signed on an annual basis, delayed deliveries can be concentrated in the second half. The third-quarter revenue guidance of 415.3 billion won, 1.2 times the combined revenue for the first half, foreshadows this."

"Given the nature of the defense business, results can be weak on a quarterly or half-year basis. In the past, the stock has fallen in response, then rebounded as results recovered," he said, identifying periods of weakness in the defense business as good opportunities to invest.

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