POSCO is the largest steel producer in South Korea and one of the top steel producers globally. It mainly produces flat steel and stainless steel from its two integrated steel facilities. It is exposed to the auto, shipbuilding, home appliance, engineering, and machinery industries. Posco controls around 40% of South Korean domestic market share and exports around 45%-50% of its steel products overseas, mainly to Asian countries. Through diversification, around 15%-20% of its revenue comes from non-steel and non-trading-related businesses. This week, I fundamentally analyze POSCO’s stock. I review PKX’s organizational restructuring and operating segments, look at its key ratios, and derive the intrinsic value using Discounted Cash Flow (DCF) analysis. Since this is a long video, please feel free to use the time stamps in the video if you only wish to watch certain topics.
I review various key ratios such as Revenue, Net Income, Shares outstanding, Dividends, Payout Ratio, Free Cash Flows (FCF), Financial Leverage, Current Ratio, Debt to Equity Ratio, Return on Equity (ROE), Days Sales Outstanding (DSO), Days Inventory, Payable Period, Cash Conversion Cycle, Inventory Turnover, etc.
After taking into account POSCO’s Trailing Twelve Month (TTM) free cash flow of $2,765 million figure, a 4% growth rate of FCF (growth for the next 10 years), 10% discount rate, 2% long term growth rate (growth from 10 year mark in the future to perpetuity), 305 million shares outstanding, and $9,950 million of long term debt, the DCF analysis yields us an intrinsic value of $97.21 per share.
0:00 Introduction / Business
0:59 Current Events
1:53 Key Ratios Analysis
12:09 Discounted Cash Flow Analysis / Intrinsic Value
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POSCO’s Website: here.
Morningstar Key Ratios Link: here.
Useful Resources here.
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Hi Vyom, now that Posco became a holding, do you think that will affect the performance of the company or is it still undervalued?