[Click eStock] "POSCO Holdings, Lithium Business Valuation 3.5 Trillion Won... Target Price Up"

[Asia Economy Reporter Son Seon-hee] Shinhan Investment Corp. maintained its 'Buy' rating on POSCO Holdings on the 28th while raising the target price from 380,000 KRW to 410,000 KRW. Although the fourth-quarter earnings this year were weak, the value of the lithium business is estimated at 3.5 trillion KRW, highlighting the company's mid- to long-term growth potential.

POSCO Holdings' fourth-quarter earnings this year are expected to fall short of market expectations, with sales of 19.6 trillion KRW (a 7.6% decrease from the previous quarter) and operating profit of 701.9 billion KRW (a 23.7% decrease from the previous quarter). Although facilities that had been shut down due to flooding in Pohang's Naengcheon resumed production sequentially in the fourth quarter, sales volume has not yet recovered to the level of the third quarter.

Additionally, due to a decline in selling prices and the reflection of repair and material costs exceeding 300 billion KRW for production facility restoration, the steel segment's operating profit is expected to perform worse than in the third quarter. However, with hot-rolled steel price increases and sales volume recovery expected in January next year, quarterly earnings are anticipated to show a gradual recovery from the first quarter after confirming a bottom in the fourth quarter.

Despite the weak earnings, there is optimism regarding POSCO Holdings' lithium business. Shinhan Investment Corp. estimates the lithium business value to be at least 3.5 trillion KRW. Not only the quantitative value but also the fact that the company has entered a business sector with relatively high entry barriers contributed positively.

Researcher Park Kwang-rae said, "Unlike other battery materials, lithium is difficult to substitute, and considering the high likelihood of a sustained supply shortage of lithium in the mid to long term, the value of the company's lithium business is expected to be revised upward as the mass production phase approaches. Since the core steel industry is unlikely to weaken further, attention should be paid to the potential for future improvement."

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