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Likely to swing to black on a standalone basis

3Q25 preview: OP to beat consensus by 7%

For 3Q25, we expect Hyundai Steel to report consolidated revenue of W5.66tr (+0.6% YoY) and operating profit of W91.7bn (+78.2% YoY). Our operating profit estimate is 7% above the current consensus of W85.5bn. On a standalone basis, we expect the firm to swing to an operating profit QoQ on wider flat product spreads. However, consolidated subsidiary earnings are likely to decline due to the absence of one-off gains recognized in the previous quarter. Also, any recovery in the long product segment is likely to remain limited due to the lingering impact of recent construction site accidents. Of note, the rebar preordering system introduced in September appears to have made a negligible contribution to earnings in the quarter.

Solid flat product earnings; long product earnings likely to bottom out

We expect Hyundai Steel to continue to deliver decent earnings, led by flat products. Flat product selling prices should continue to recover, supported by the imposition of antidumping duties of around 30% on Chinese and Japanese hot-rolled steel (following similar duties imposed on Chinese heavy plates in February). Hot-rolled steel prices should start to increase in earnest once buyers finish consuming inventories secured before the duty imposition. For shipbuilding-grade heavy plates, the company is reportedly negotiating with customers on a proposed W30,000/tonne price hike.

Meanwhile, the recovery in long product earnings is likely to remain slow, given the delayed construction market recovery. In the near term, the construction industry is likely to face heightened uncertainty stemming from safety issues. However, considering the low base created by the sector’s prolonged weakness and recent policy initiatives (e.g., measures to increase housing supply announced on Sep. 7 and an updated rapid integrated planning framework for Seoul announced on Sep. 29), we believe signs of recovery could begin to emerge in 2026.

Maintain Buy and TP of W46,000; retain as our top pick in steel

We maintain our Buy rating on Hyundai Steel with a target price of W46,000 (based on a target P/B of 0.3x). We expect improving flat product spreads to continue driving overall profitability. Notably, in October, the government is set to announce plans to enhance the steel sector’s competitiveness, including R&D and financing support, incentives to divest non-core businesses/assets, and stronger safeguards against import duty circumvention. Other positive factors include the expected announcement of US electric arc furnace investment plans later this year (which should ease funding uncertainties), the potential sale of Hyundai IFC, and increased focus on the value of the firm’s 6% stake in Hyundai Mobis. The stock remains undervalued, trading at a 2025F P/B of 0.24x.