Posco’s 2Q Results Hit by Lower Volume and High-Cost Inventory; FVE Unchanged
No-moat Posco’s first-half 2017 net profit of KRW 1,364 billion was below our expectations due to weak performance from the steel business, the engineering and construction, or E&C, division, and the energy segment. We decrease our 2017 net profit by 19% to take into account the disappointing results. We retain our fair value estimate of USD 49.00 per ADR (KRW 225,000 per share), given that our long-term EBITDA forecast is largely unchanged. We think Posco is currently overvalued, as it has ...POSCO is engaged in the manufacture and distribution of steel rolled products and plates in the domestic and overseas markets. Co. manufactures and sells a diversified line of steel products, including cold rolled and hot rolled products, stainless steel products, plates, wire rods and silicon steel sheets. Also, Co. is able to meet a broad range of customer needs from manufacturing industries that consume steel, including automotive, shipbuilding, home appliance, engineering and machinery industries. Co. operates two steel plants, Pohang Works and Gwangyang Works in the Republic of Korea.
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