[Click eStock] "POSCO Holdings, Profit Recovery Expected from Q2... Target Price Down"

Target Price Revised Down from 600,000 Won to 530,000 Won

Shinhan Investment Corp. on the 1st lowered the target price for POSCO Holdings from 600,000 KRW to 530,000 KRW, expecting a stepwise profit recovery to begin from the second quarter of this year. The investment rating was maintained at 'Buy.'

Researcher Park Kwang-rae of Shinhan Investment Corp. explained, "Although the target price is lowered to reflect changes in earnings estimates, the downside risk to the stock price is limited. The decline in earnings is expected to end after the first quarter, and lithium prices, which determine the medium-term trend of the stock, have bottomed out as they have fallen to the production cost levels of major mines."

POSCO Holdings' first-quarter earnings are expected to fall short of expectations. Researcher Park said, "POSCO Holdings' first-quarter sales are expected to increase by 3.2% quarter-on-quarter to 19.3 trillion KRW, and operating profit is expected to rise by 39.3% to 423.3 billion KRW, falling short of market expectations (sales of 19.4 trillion KRW, operating profit of 711.4 billion KRW). The main reasons for the weak performance are that the average selling price (ASP) in the steel sector did not rise as much as initially expected, and one-time costs including labor expenses continued to be reflected in the first quarter following the fourth quarter." He added, "Despite active price increase efforts since the beginning of the year, the ASP increase is expected to be only 20,000 KRW per ton compared to the previous quarter (initially expected to be 30,000 KRW) due to delayed recovery in downstream industries and a decline in prices of imported Chinese steel products."

Operating profit is expected to hit bottom in the first quarter and show a stepwise recovery from the second quarter. Researcher Park said, "Steel ASP and sales volume are expected to show a slight upward trend in the second quarter compared to the first quarter, recording operating profit in the 600 billion KRW range. In the second half of the year, rather than price increases, the improvement in spreads due to the downward stabilization of major raw material prices such as iron ore and coking coal will drive earnings growth." Shinhan Investment Corp. forecasted POSCO Holdings' steel segment operating profit for this year to decrease by 25.6% year-on-year to 1.9 trillion KRW, and the company's overall operating profit to decline by 18.7% to 2.9 trillion KRW.

It is expected that the stock price could rebound if interest rates stabilize downward. Researcher Park said, "If interest rates stabilize downward in earnest, lowering the discount rate, and a trigger emerges that turns the narrative on the electric vehicle market favorably again, the stock price can sufficiently rebound."

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