Hanwha Investment Securities has maintained its Buy recommendation on Hyundai Steel (KRX: 004020) whilst lowering its target price from 50,000 won to 43,000 won.
The brokerage forecasts second-quarter 2026 consolidated revenue of 6.41tn won and operating profit of 72.8bn won — a result that would fall 29.1% short of the market consensus. Although earnings are expected to improve sequentially as peak-season demand lifts sales volumes and long-product steel prices rise, the pace of profit recovery in the standalone business unit is seen as disappointing relative to earlier expectations.
The improvement in second-quarter earnings is being driven by long products (structural steel and rebar) rather than flat products (sheet and plate). Increased exports to the United States have tightened domestic supply, pushing long-product prices higher. Although scrap-steel prices have added to input costs, the rise in selling prices is estimated to have more than offset this, widening the spread for electric-arc furnace operations.
Flat products, by contrast, have shown little spread improvement despite higher distribution prices. Automotive steel-sheet prices were held steady through the second quarter under a negotiating structure that sets prices in February and August, while a planned increase in shipbuilding plate prices has also been delayed. An additional headwind came from the surge in coking-coal prices during the first quarter, which is feeding into production costs with a lag.
A meaningful recovery in earnings power is not expected until the third quarter. Automotive steel-sheet prices should rise following the August contract negotiations, and the pending shipbuilding plate increase is also anticipated to feed through. Relief on the cost side is expected in the second half as the earlier spike in coking-coal prices stabilises.
The rationale for the target-price cut centres on the recovery in earnings being less robust than originally anticipated. Hanwha Investment Securities has reduced its 12-month forward price-to-book ratio (PBR) target from 0.32 times to 0.29 times. Nevertheless, it has retained the Buy rating, noting that the stock has already fallen roughly 30% over the past three months, compressing its PBR to 0.18 times. Based on the current share price of 26,900 won (as of 10th July), the implied upside to the new target stands at 59.9%.