KB Securities lowers Poongsan target... “Unfavorable business conditions such as falling copper prices”

On the 4th, KB Securities lowered its target stock price for Poongsan [103140] from 112,000 won to 90,000 won, saying, “Unfavorable industry conditions such as the strengthening of the won and stabilizing copper price declines are inevitable.”

The investment opinion of ‘buy’ was maintained. The previous day's closing price was 60,300 won.

Researcher Choi Dong-hyun explained in the report that day, "The new technology sector has slowed due to unfavorable macroeconomics, and the defense industry sector estimates full-scale delivery recovery in 2027, lowering the operating profit estimate rate for 2026 and 2027, thus lowering the target stock price."

Operating profit in the third quarter of this year was 108.8 billion won, slightly exceeding the consensus (market average forecast). In particular, despite continued domestic supply disruptions in the defense industry, operating profit margin increased to 17% due to increased export volume.

On the other hand, despite the growth in average selling price (ASP), the Shindong division's operating profit margin was only 2% due to a decrease in sales volume and the strong won.

Operating profit in the fourth quarter was expected to be sluggish at 52.8 billion won.

Researcher Choi predicted, “The Shindong division is expected to record an operating loss of KRW 14 billion and turn into a loss,” and added, “With the strengthening of the won and the stabilization effect of copper prices in full effect, metal loss (loss that occurs when the value of inventory held when the price of copper falls) decreases will occur more than KRW 40 billion.”

The defense industry predicted, “We estimate an operating profit of KRW 66.9 billion due to sales growth due to the increased proportion of domestic demand,” and added, “Due to the high contribution from domestic demand, the defense industry operating profit margin (OPM) will be 13.1%, down 3.9 percentage points compared to the previous quarter.”

Points to note next year were the normalization of delivery times in the defense industry, expansion of high-margin business in the new copper division, and the impact of macro (copper, exchange rate).

Researcher Choi explained, "Delivery dates for the defense industry will be normalized, but the improvement in profitability will not be significant due to the high proportion of domestic demand until 2027, and the Shindong division will expand high added value to 40%, increasing the simple processing margin by more than 1 percentage point." He added, "It is highly likely that macro will be unfavorable, so we expect metal loss on an annual basis."