Posco shares have been flying high as the Korean steelmaking giant is on a path to deliver its best performance in six years this year.
Based on data compiled by FnGuide, Posco due to report second-quarter earnings on Thursday is estimated to have finished the quarter ended in June with an operating profit of 944.1 billion won ($836.1 million) on a consolidated basis, up 39.1 percent from a year earlier, but down from 1.37 trillion won in the previous quarter.
“The widening steel spread (the difference between the price of the raw material and finished product) is expected to raise Posco’s third-quarter earnings to 1.2 trillion won,” said Park Jong-kook, an analyst at Kiwoom Securities Co.
Yuanta Securities Korea Co. projected Posco’s operating profit for full 2017 on a consolidated basis would jump 70.5 percent from a year ago and double from 2015 levels to 4.85 trillion won.
Posco shares have gained 41 percent in the last year, outpacing the 20.2 percent gain of the benchmark Kospi. Posco shares ended Monday at 317,500 won, up 2,500 won or 0.79 percent from the previous session.
The stock has been a favorite among foreign and institutional investors after it reported 10.8 percent profit rate against revenue last year to be more profitable than the world’s largest ArcelorMittal with 7.3 percent and far more than its Japanese rival Nippon Steel & Sumitomo Metal whose profit margin hovered below 2 percent.
“Spread will be better in the second half. Even if the second-quarter earnings are not as stunning as the first quarter, correction in the shares would give investors opportunities to buy them at a cheaper level,” Park of Kiwoom said.
By Ko Min-suh
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