We currently maintain an Outperform recommendation on POSCO ( PKX - Analyst Report ) , one of the leading Korean steel producers. The recommendation is based on the company’s long-term growth prospects. The $25.5 billion company is the world’s third largest steelmaker on the basis of output.

Why Outperform?

Since its inception in 1968, POSCO has been producing the best quality steel and steel products through 143 companies out of its total 202 companies operating across the world.

In 2012, crude steel production was at its highest level at 37.986 million tons and represented a 1.8% increase over 2011. Finished product sales were up 1.6%; export ratio of finished product sales was at 41.7% versus 38.6% in 2011.

The company’s product portfolio has a high proportion of value-added products, like cold-rolled steel, automotive steel plates and electric steel sheets, which work well in its favour. Its expansionary efforts in the domestic market as well as in the international arena, especially the fast growing and emerging markets worldwide, are quite remarkable.

Going forward, POSCO aims to expand its capacity to 450 Kt/year in China, 300 Kt/year in India, and 200 Kt/year in Turkey. Moreover, the company is planning to produce synthetic natural gas (SNG), an effective replacement for Liquid Natural Gas (LNG). The company invested roughly KRW 7.2 trillion in 2012 and plans investing KRW 7-8 trillion in 2013 to expand its capacity in steel production, gain self-sufficiency in raw material, and further its expansion plan of energy and material businesses.

Also, the company emphasizes cost savings and achieved KRW 1.3 trillion in saving in 2012 through adjustment in raw material blending ration in iron/coke making process, use of low-cost by-products and substitute materials.

Other Stocks to Consider

Other stocks to watch out for are Companhia Siderurgica Nacional ( SID - Analyst Report ) , Gibraltar Industries, Inc. ( ROCK - Analyst Report ) and Commercial Metals Company ( CMC - Snapshot Report ) , each with a Zacks Rank #2 (Buy).