POSCO Holdings Inc. target price cut from KRW 450,000 to KRW 410,000: “Improvement trajectory remains valid”

[Financial News] NH Investment & Securities lowered its target price for POSCO Holdings Inc., revising its earnings outlook to reflect falling lithium prices and slower-than-expected increases in steel product prices.
However, it maintained its Buy rating, citing the potential for higher domestic steel prices amid protectionism and medium- to long-term growth from the expansion of the lithium business.
On the 3rd, NH Investment & Securities analyst Choi Young-gwang cut the target price for POSCO Holdings Inc. by 8.9%, from KRW 450,000 to KRW 410,000. That represents upside potential of about 44.9% from the previous day’s closing price of KRW 283,000.
The main reason for the target price cut was a revision to earnings estimates. Lithium prices have fallen as some mines resumed operations, while steel prices have risen more slowly than expected. As a result, the forecast for next year’s operating profit was cut by 10.5%, from KRW 4.235 trillion to KRW 3.791 trillion. The lower value of investment assets, reflecting declines in the share prices of listed subsidiaries, was also factored into the target price revision.
However, analyst Choi remained positive about the potential for a recovery in the steel business. He assessed that “the direction of recovery in the steel business’s earnings, driven by higher domestic steel product prices amid protectionism, remains valid.”
He added, “Changes in the business portfolio, driven by the expansion of the lithium business and gradual improvements in profitability, are also expected to bring a valuation expansion.”
Third-quarter results beat market expectations. POSCO Holdings Inc.’s consolidated operating profit rose 15.4% from the previous quarter to KRW 945 billion.
That also topped the market consensus of KRW 808 billion. Operating profit in the steel division increased 40.4% quarter on quarter to KRW 566 billion. The increase came as sales volume grew 2.4% ahead of major maintenance work in the fourth quarter, while product prices rose 3.3%.
By contrast, the secondary battery materials division swung to an operating loss of KRW 16.9 billion. Despite improved results at POSCO Future M, falling lithium prices and a winter decline in brine evaporation at POSCO Argentina S.A.U. resulted in an operating loss of KRW 67 billion in the lithium business.
Fourth-quarter results are expected to weaken again. NH Investment & Securities estimated operating profit of KRW 511.3 billion for the quarter, down 45.9% from the previous quarter and below the market consensus of KRW 757.2 billion.
It expected major maintenance work at the Gwangyang blast furnace to reduce steel sales volume, while pressure on profitability in the secondary battery materials division would continue amid weak lithium prices.
A key factor in a recovery in POSCO Holdings Inc.’s share price will be whether higher steel prices and improved profitability in the lithium business are reflected in actual results. NH Investment & Securities maintained its view that the medium- to long-term direction of business improvement, centered on steel and lithium, remains valid, while tempering expectations for the pace of a short-term earnings recovery.
[email protected] Kang Jung-mo Reporter