[Click eStock] "Posco Chemical Expected to Benefit from US Inflation Reduction Act Passage... Target Price Up"

[Asia Economy Reporter Myunghwan Lee] Hanwha Investment & Securities announced on the 25th that it maintains a buy rating on POSCO Chemical and has raised the target price from 150,000 KRW to 195,000 KRW. This is due to the expected benefits for the company following the passage of the U.S. Inflation Reduction Act (IRA).

Hanwha Investment & Securities explained that with the final passage of the IRA on the 16th, the U.S. sanctions against China are expected to remain, which will significantly benefit POSCO Chemical. The bill includes restrictions on the use of battery raw materials, highlighting companies that have secured recycling and raw material supply chains. POSCO Chemical, through its affiliate POSCO, has strengths in securing lithium and nickel, and in the anode material business?where decoupling from China is most challenging?it is the only meaningful company excluding Chinese firms, according to Hanwha Investment & Securities.

Hanwha Investment & Securities forecasts POSCO Chemical’s 2024 revenue to reach 8.1 trillion KRW and operating profit to be 673.8 billion KRW. The company’s 2024 cathode material production is estimated at 130,000 tons, aligning its revenue outlook with peers in the industry. POSCO Chemical plans to procure raw materials directly through POSCO in the mid to long term, and if it can secure these materials at prices lower than the London Metal Exchange (LME) rates, profitability improvement is also possible.

Hanwha Investment & Securities expects POSCO Group’s vertical integration strategy for secondary battery materials to act as a premium factor for POSCO Chemical. Researcher Yongwook Lee of Hanwha Investment & Securities stated, "Global automakers and battery companies are expected to increasingly include already secured material suppliers in their value chains rather than directly securing raw materials themselves." He added, "POSCO Chemical’s customer base is likely to expand beyond its current single client, LG Energy Solution."

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