Korea Investment & Securities maintains high price target for POSCO Holdings

Korea Investment & Securities Co. headquarters. [Courtesy of Korea Investment & Securities]

Korea Investment & Securities Co. reaffirmed its price target of 900,000 won ($671.9) for POSCO Holdings Inc. on the belief that the Korean steel giant has entered the third phase of growth.

The target price is 60 percent higher than the stock’s closing price of 560,000 won on Tuesday, up 1.63 percent from the previous trading day. The stock has slipped 12.77 percent this month.

Korea Investment & Securities had unveiled the highest price target for POSCO Holdings among domestic brokerage firms on July 25. The brokerage house justified its target price of 900,000 won by applying an unfamiliar calculation formula known as “lithium value per share.”

POSCO Holdings’ stock price, however, has continued to decline and is currently trading in the mid to lower 500,000 won range. Nevertheless, the securities firm reiterated its positive outlook on Tuesday, keeping the price target unchanged at 900,000 won.

“Going forward, investment in the secondary battery materials business will become the foundation for growth,” said Choi Moon-sun, an analyst at Korea Investment & Securities. Choi said that the company’s first leap forward was seen during the 10-year period between 1974 and 1984, when the Pohang Works was completed, and the second rising phase took place between 1987 and 1999 with five blast furnaces completed at the Gwangyang Works. He sees that now will be the third phase of rise by boosting the secondary battery materials business.

The brokerage used a 12-month forward price-to-earnings ratio (PBR) of 1 time plus a lithium value of 200,000 won per share to calculate the price target of 900,000 won.

The lithium value per share is based on the net profit of the lithium business as of 2028 and inferring the amount for 2024.

Yet, some experts say this valuation is overly optimistic. In fact, Kyobo Securities Co. has unveiled a target price of 450,000 won for POSCO Holdings.