[Click eStock] "Electric Vehicle Production Disruptions to Be Resolved... Posco Chemical Presented as Top Pick"

[Asia Economy Reporter Ji Yeon-jin] Korea Investment & Securities announced on the 15th that it maintains a buy investment rating and a target price of 180,000 KRW for POSCO Chemical, expecting that the production disruptions of electric vehicles will gradually be resolved and that the supply volume of cathode and anode materials for European electric vehicles will increase from the second quarter. It also designated POSCO Chemical as the top preferred stock in secondary battery materials.

Jung-han Kim, a researcher at Korea Investment & Securities, said, "Although we lowered the 2023 estimated earnings per share (EPS) by 18% compared to the previous estimate, considering the increased investment scale in cathode materials and the rising costs for mass production of new products such as artificial graphite, we believe POSCO Chemical has competitiveness in internalizing the secondary battery material value chain under the support of its parent company POSCO and affiliated companies," adding, "It can achieve stable profit margins through self-procurement of raw materials, thus we assign a valuation premium compared to other material companies."

The secondary battery industry relies heavily on the supply of raw materials for materials, which account for more than 60% of production costs. In the first quarter, the sharp rise in lithium and nickel prices led to increased prices of secondary batteries and electric vehicles, raising concerns about demand decline and a slowdown in the secondary battery market growth rate. Additionally, Korea depends on China for raw material procurement, making it difficult to respond to sudden raw material price fluctuations. However, since POSCO Chemical has the highest internalization rate of secondary battery material raw materials in Korea, it is easier for the company to cope with supply shortages compared to competitors.

In the first quarter of this year, sales are expected to reach 558.9 billion KRW, a 20% increase year-on-year, while operating profit is forecasted to decrease by 30% to 24 billion KRW. Due to continued production disruptions of European electric vehicles, the shipment volume of materials is expected to have not increased. However, due to the rise in cathode material product prices, secondary battery material sales are estimated to have increased by 11% and operating profit by 58% compared to the previous quarter. Researcher Kim predicted, "Although natural graphite anode materials could not raise product prices in the first quarter despite the rise in raw material prices such as graphite flakes, recent price increases in China have partially appeared, so profit margins are expected to improve from the second quarter as electric vehicle production disruptions recover."

This content was produced with the assistance of AI translation services.