20171115-三星证券-Fundamentals_outweigh_concerns_7页_470kb

Company Update Summary: Seah Steel (003030)

Core Content

This report provides an analysis of Seah Steel (003030), highlighting its financial performance, valuation metrics, and market outlook. The analyst maintains a BUY rating with a target price of KRW130,000, and the current price is KRW90,700. The company's fundamentals are deemed to outweigh current concerns, especially in relation to US trade policies.

Main Points

• 3Q Performance:

  • Consolidated sales increased by 13.5% quarter-over-quarter (QoQ) to KRW619.2b.
  • Operating profit surged by 134% QoQ to KRW51.2b, surpassing consensus estimates by 36.6%.
  • The growth in operating profit is attributed to increased sales volume and a widening spread between domestic and export businesses.

• Valuation Metrics:

  • The company trades at 0.4x 2018 P/B, which is considered undervalued.
  • The P/E ratio has decreased from 12.4 in 2015 to 5.3 in 2018.
  • The EV/EBITDA ratio has also declined from 7.0 in 2015 to 3.8 in 2018.

• Market Performance:

  • Over the past year, Seah Steel has shown a 8.5% increase in value.
  • In comparison, the Kospi index has declined by 15.2%.

• Earnings Forecasts:

  • 2017E EPS is KRW15,539, representing a 17.3% increase from the 2016 EPS of KRW13,249.
  • 2018E EPS is KRW17,106, a 8.1% increase from 2017E EPS.

• Export Outlook:

  • The analyst expects US rig counts to recover with oil price hikes, which should benefit Seah Steel's steel pipe exports.
  • Korean OCTG products are 30% cheaper than US products, maintaining their price competitiveness even in the face of tariffs.

• Trade Policy Concerns:

  • Despite concerns over the Trump administration's trade stance, the analyst believes these are overblown due to the US being a net steel importer and the competitiveness of Korean steel products.
  • Historical evidence from July 2014 shows that Korean steel products retained competitiveness after being hit by antidumping tariffs.

Key Information

• Market Cap: KRW544.2b/USD486.72m
• Shares (float): 6,000,000 (48.4%)
• 52-week high/low: KRW115,500/KRW82,800
• Avg daily trading value (60-day): KRW2.9b/USD2.6m

Key Changes

SAMSUNG vs THE STREET

Rating Overview

• BUY rating: 5
• BUY: 4
• HOLD: 3
• SELL: 2
• SELL★★★: 1

Financial Highlights

• Sales Growth:
  • 2017E sales are expected to be KRW2,225.9b, with a 23.8% increase from 2016.
• Operating Profit Growth:
  • 2017E operating profit is expected to be KRW135b, a 74.5% increase from 2016.
• Net Profit Growth:
  • 2017E net profit is expected to be KRW90b, a 38.4% increase from 2016.
• ROE:
  • 2017E ROE is 7.1%, up from 5.1% in 2016.
• EPS Growth:
  • 2017E EPS is KRW15,539, up 17.3% from 2016.
  • 2018E EPS is KRW17,106, up 8.1% from 2017E.

Key Charts and Graphs

• Chart 1: Korea: OCTG export volume
• Chart 2: Korea: OCTG export ASP
• Chart 3: Korea: Oil pipe export volume
• Chart 4: Korea: Oil pipe export ASP
• Chart 5: WTI price
• Chart 6: US rig count
• Chart 7: Export HRC spreads: OCTG vs oil pipe
• Chart 8: Domestic HRC spreads: Structure vs plumbing pipe
• Chart 9: US Steel: Pipe sales volume
• Chart 10: US Steel: Pipe ASP
• Chart 11: OCTG price discount: Korea import vs US domestic
• Chart 12: Seah Steel: P/B band

Compliance Notice

• As of Nov 14, 2017, the analyst did not hold any shares or convertible debt instruments in the company.
• Samsung Securities holdings would not exceed 1% of each company's outstanding shares if debt instruments were converted.
• The report is prepared without external influence and reflects the analyst's views.
• The material is under copyright and may not be altered, reproduced, or distributed without prior written permission.
• The report is not an offer to buy or sell securities and does not take into account individual client circumstances.

Investment Ratings

• BUY: Expected to increase in value by 10% or more within 12 months and is highly attractive within the sector.
• HOLD: Expected to increase or decrease in value by less than 10% within 12 months.
• SELL: Expected to decrease in value by 10% or more within 12 months.

Industry Ratings

• OVERWEIGHT: Expected to outperform the market by 5% or more within 12 months.
• NEUTRAL: Expected to outperform or underperform the market by less than 5% within 12 months.
• UNDERWEIGHT: Expected to underperform the market by 5% or more within 12 months.

Global Disclosures & Disclaimers

• This report is for information purposes only and is not an offer or solicitation to buy or sell securities.
• It does not provide individually tailored investment advice.
• No representation or warranty is made regarding the accuracy or completeness of the information.
• Samsung Securities disclaims all liability for any loss or damage arising from the use of this report.
• Past performance is not indicative of future results.
• Foreign currency exchange rates may affect the value of securities mentioned in this report.
• For investment advice or trade execution, contact a local sales representative.