[Click eStock] "POSCO Future M, Short-term Profitability Deterioration... Target Price Down"

Kiwoom Securities lowered the target price for POSCO Future M from 660,000 KRW to 579,000 KRW on the 17th. The investment rating was maintained at 'Buy.'

POSCO Future M's third-quarter earnings are expected to be sales of 1.4 trillion KRW and an operating profit of 52.4 billion KRW. The operating profit represents a 36% decrease compared to the same period last year, which is below market expectations. Short-term profitability deterioration appears inevitable due to the sharp decline in lithium prices leading to a drop in average selling price (ASP), raw material cost lag effects, inventory valuation losses, and the reflection of initial operating costs for the NCA line.

Operating profit for the fourth quarter is estimated at 72.9 billion KRW. Although a decline in the ASP of cathode materials is expected due to falling metal prices in the fourth quarter as well, the rate of decline is expected to be smaller compared to the previous quarter. Kiwoom Securities forecasted that due to year-end one-time expenses, initial operating costs of the artificial graphite plant, and ASP decline, profitability improvement will be limited until the end of this year.

Junsoo Kwon, a researcher at Kiwoom Securities, stated, "Although uncertainties in earnings remain until this year due to weakening front-end demand and falling lithium prices, we believe the medium- to long-term growth potential is high. The acquisition of new customers and supply contract signings related to both anode and cathode materials are expected, providing a valid momentum for a rebound after future stock price adjustments."

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