[Click e-Stock] "POSCO Holdings Sees Steel, Energy, and Lithium on Track...Target Price Raised"

Eugene Investment & Securities Taps POSCO Holdings as Top Sector Pick
Sets New Target Price at 4.9 Million Won, Initiates 'Buy' Recommendation

On September 1, Eugene Investment & Securities initiated coverage of POSCO Holdings, highlighting that profits from steel, energy, and lithium segments are all improving. The firm set a new target price of 4.9 million won, maintaining a 'Buy' recommendation.

Kim Sojeong, a research analyst at Eugene Investment & Securities, commented, "We estimate the fair corporate value of POSCO Holdings at 39.4 trillion won. We expect third-quarter operating profit to reach 430 billion won, up 56.9% quarter-on-quarter, as spread expansion in the blast furnace segment is driven by the stabilization of raw material prices in the second half. The new business segment is also entering a phase of visible profitability, as POSCO Argentina is projected to record its first annual profit."

She added, "The current share price is significantly discounted compared to fundamentals, so we see this as a valid entry point for an aggressive buy strategy and consider POSCO Holdings our top pick within the sector."

With the company's triple-core growth strategy, centered on steel, energy, and lithium, moving forward, consolidated operating profit this year is expected to reach 3 trillion won, up 66% year-on-year.

Looking at major subsidiaries, POSCO has faced reduced import pressure following anti-dumping measures against hot-rolled products from China and Japan, which has supported higher product prices and sales volume recovery. Raw material prices are also expected to settle at lower levels in the latter half, leading to margin improvement.

POSCO International achieved a record-high quarterly operating profit in the second quarter, aided by increased production at Australian natural gas company Senex Energy, expanded recovery costs from Myanmar gas fields, and a normalization of palm oil production in Indonesia.

POSCO Future M saw improved profits as sales of anode materials normalized and underlying materials experienced higher income. POSCO Argentina achieved its first quarterly profit in the second quarter, thanks to stable operations and increased sales. The operating loss at POSCO Pilbara Lithium Solution (P-PLS) also decreased, allowing the battery materials segment to return to profitability for the first time in nine quarters.

Kim added, "With normalization in the steel segment in the second half, earnings recovery in infrastructure, and the lithium business turning profitable, the group appears to have moved past the bottom of its profit cycle."

The lithium business at POSCO Holdings has now entered a period where investments are beginning to contribute to results. Kim stated, "Plant 1 in Argentina is expected to reach normal operation this year and turn profitable, with unit production costs declining as utilization rates increase. Next year, as Zimbabwe resumes restrictions on lithium concentrate exports, the price of lithium carbonate equivalent is expected to rise to as much as $25,000 per ton." She further commented, "With the operation of a second plant and additional capacity expansions, the profit contribution from the lithium business should increase over the medium to long term."

Meanwhile, Eugene Investment & Securities forecast POSCO Holdings would record consolidated sales of 18.8 trillion won in the third quarter, representing an 8.7% increase year-on-year, with operating profit of 744 billion won, up 16.5% year-on-year.

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