Expanding Battery Value Chain in US IRA Bill... Which Stock Did the Securities Industry Raise Target Price For?

[Image source=Yonhap News]

[Asia Economy Reporter Kwon Jaehee] With the passage of the U.S. 'Inflation Reduction Act (IRA),' which entails large-scale investments to address climate change and energy security, the benefits are expanding not only to electric vehicle batteries but also to the entire battery value chain. The IRA legislation includes requirements for key minerals and components used in batteries. As a result, POSCO Chemical, which operates in the lithium business?one of the core minerals for electric vehicle batteries?is gaining attention.

According to the Korea Exchange on the 5th, POSCO Chemical's stock price has risen more than 70% just this year. As of 9:08 AM on the same day, POSCO Chemical was trading at 164,500 KRW. Having risen more than 50% since the second half of the year, POSCO Chemical also recorded an 'earnings surprise' in the second quarter.

Moreover, with expectations that POSCO Chemical will benefit from the IRA legislation, securities firms are raising their target stock prices for the company. Hanwha Investment & Securities raised its target price from 150,000 KRW to 195,000 KRW, Shinhan Financial Investment set it at 200,000 KRW, and Hana Securities raised it to 206,000 KRW.

The key point in the IRA legislation for receiving electric vehicle subsidies is to reduce dependence on China for raw materials and components. To receive the full $7,500 tax credit when purchasing an electric vehicle, the final assembly of the vehicle must take place in North America, and if the core mineral requirements and battery component requirements are met, each can provide a $3,750 tax credit. In other words, to receive the full $7,500 tax credit, the core minerals must be extracted, processed, or recycled in the U.S. or countries that have free trade agreements (FTA) with the U.S. While most of the core minerals used in electric vehicle batteries are Chinese-made, the POSCO Group owns lithium brine deposits and collaborates on lithium concentrate in Australia. The POSCO Group's vertical integration from lithium concentrate to lithium and cathode materials for secondary batteries is also considered a strength.

Lee Yong-wook, a researcher at Hanwha Investment & Securities, analyzed, "POSCO Chemical can secure lithium and nickel through POSCO, potentially procuring them at prices lower than the London Metal Exchange rates, which could improve profitability. Global automakers and battery companies are likely to have high demand to include already secured material suppliers in their value chains."

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