Shares of South Korea’s leading steel maker Posco have been rapidly picking up thanks to its cost-cutting efforts and strengthening steel prices in China.

On Monday, Posco shares added 2.28 percent from the previous session to close at 247,000 won in Seoul. The stock price soared around 22 percent from the 52-week-low of 203,500 won in August 26 last year and almost recovered to the levels reached at the end of 2018. The company showed the fastest recovery in stock price performance among its domestic and foreign rivals.

Posco’s operating profit margin was 6.5 percent in the third quarter ended September 30 last year, higher than Chinese Baoshan Iron and Steel at 4.9 percent, Luxembourg-based ArcelorMittal at 1.8 percent, Korea’s Hyundai Steel at 0.7 percent and Japan’s Nippon Steel at 0 percent.

The company also has the strongest credit rating than others. Moody’s rated the company Baa1 with a stable outlook while downgrading the outlook for Nippon Steel and ArceloMittal from positive to negative with Baa1 and Baa3 ratings, respectively.

According to Kiwoom Securities, Posco’s net debt ratio declined from 20.2 percent in 2018 to 14.7 percent in 2019 and is expected to fall further this year to 11.3 percent. Its surplus cash flow grew to 4.11 trillion won ($3.5 billion) last year from 1.57 trillion won in 2018.

“Posco has been showing sound financial health despite a global industry slowdown,” said an official from the company. “The company cut 240 billion won in expenses as of the end of last September and sales of premium products rose 6 percent from 2018 to surpass 10 million tons.”

Kiwoon Securities analyst Lee Jong-hyung said Posco is expected to post improved earnings from the first quarter this year thanks to the rising steel prices in China that will be further boosted by thawing trade conflicts between the U.S. and China following the phase one trade deal.

The steel prices have been on the rise in China due to the output cut amid toughening environmental regulations in the country. The price of hot rolled steel rose to $570 per ton in January after falling to $510 in October last year, according to industry experts.

Local analysts set the target stock price for Posco at above 300,000 won. Lee said the company’s price-to-book ratio (PBR) stands at mere 0.44 despite rapid pickup in stock price since last November.

By Chung Seung-hwan and Choi Mira

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