[Click eStock] POSCO Chemical, Cathode Material Smiles but Anode Material Slumps, 'Target Price Lowered'

[Asia Economy Reporter Lee Seon-ae] Daishin Securities announced on the 22nd that it maintains a buy rating on POSCO Chemical but lowers the target price to 150,000 KRW due to weakness in the anode material business. This is based on a decline in the material sector multiple despite upward revisions in earnings estimates.

Jeon Chang-hyun, a researcher at Daishin Securities, explained, "The target price was calculated using the SOTP method, applying 11.7 trillion KRW for the energy materials (cathode/anode materials) segment, 50 billion KRW for refractory manufacturing and maintenance, and 19.5 billion KRW for Lime Chemical. For energy materials, we applied an average EV/EBITDA multiple of 23.4x from competing material companies to the expected 2023 EBITDA of 501 billion KRW."

Second-quarter sales reached 803.2 billion KRW, a 67% increase year-on-year. Operating profit rose 55% to 55.2 billion KRW. Notably, operating profit exceeded market expectations by 72.5%. The energy materials (cathode/anode materials) segment led overall performance with operating profit of 28.4 billion KRW, up 98%.

The cathode material segment saw significant improvements in sales and profitability due to price increases linked to rising metal prices, the effect of exchange rate appreciation, and the inclusion of strong results from Zhejiang Puhua (a JV with Huayou Cobalt for cathode materials). Conversely, the anode material segment continued to underperform due to decreased sales volume caused by sluggish EV demand amid a shortage of automotive semiconductors. Profitability also worsened compared to the previous quarter due to cost structure deterioration from rising graphite prices, a key raw material. Refractory manufacturing and Lime Chemical results were slightly weaker than the previous quarter. PMC Tech improved sales and profitability due to rising needle coke prices.

In the second half of the year, growth in the energy materials segment is expected to continue, centered on cathode materials. Cathode materials are anticipated to deliver solid results through price increases and shipment volume growth until the third quarter. Meanwhile, anode materials are expected to see profitability improvements from price hikes starting in the third quarter, but limited top-line growth is expected due to continued weak sales volume.

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