POSCO Holdings’ target price raised by Samsung Securities on positive outlook

POSCO Holdings Inc. headquarters [Photo provided by POSCO]

POSCO Holdings Inc. had its target price raised 12.8 percent to 440,000 won ($334) by Samsung Securities Co. based on higher evaluation of its steel and battery materials businesses.

“The steel industry’s profitability will increase due to eased oversupply, while new businesses, such as those represented by lithium, will start to generate visible performance,” said Baek Jae-seung, a Samsung Securities stated in a report Monday.

Although POSCO Holdings’ steel business showed weak performance in the fourth quarter due to costs after its Pohang plant sites suffered damaged from a flood and decreased sales volume, but it will experience a recovery from the first quarter of this year as it normalizes operations, the analyst said.

“Complete recovery of the Pohang plant’s operation will accelerate from the second quarter, which is expected to cause the first-quarter performance to fall below the consensus,” Baek said. “Overall, performance improvement will be seen this year, with a performance strength in a cycle of eased oversupply.”

POSCO Holdings’ revenue for the first quarter is estimated to be 20.5 trillion won, up by 6.4 percent on-quarter, and is expected to post an operating profit of 505.2 billion won, compared with a loss the previous quarter. But operating profit is about 33 percent lower than the market’s consensus of 753 billion won.

However, the analyst pointed out the recycling business, considered as POSCO Holdings’ new key business in battery materials, adding that “significant sales will be recognized from June of this year.”

The annual sales from the company’s entire recycling business are estimated to be 300 billion won, which is not a high contribution, but the business is expected to benefit from the European Union’s Critical Raw Materials Act in the medium term and profitability contribution from the lithium business will gradually become visible through the completion of lithium hydroxide plants in Gwangyang and Argentina.

“POSCO Holdings’ new businesses will make a significant contribution to improving its valuation, in addition to better performance through the recovery of the steel market,” Baek said.