[Click eStock] "POSCO Future M, short-term performance disappointing but stock price may turn up... target price lowered"

Target Price Revised Downward by 8% Compared to Previous Level

On the 9th, KB Securities forecasted that although short-term earnings of POSCO Future M might be disappointing, a stock price rebound is possible. The target price was lowered from 400,000 KRW to 370,000 KRW, while maintaining a 'Buy' investment rating.

Lee Chang-min, a researcher at KB Securities, explained, "The reason for lowering the target price is that we reflected the recent additional decline in lithium prices by lowering the average selling price (ASP) forecast for cathode materials, and we also revised downward the medium- to long-term utilization rate forecast considering the slowdown in the front-end market growth."

POSCO Future M's second-quarter earnings this year are expected to meet market expectations. The researcher said, "POSCO Future M's second-quarter earnings are estimated at 984.1 billion KRW in sales, down 18% year-on-year, and operating profit of 22.4 billion KRW, down 57%, which is expected to meet the consensus (average securities firm forecast). Due to the continued impact of falling lithium prices, the cathode material ASP, which plummeted 21% in the first quarter, is estimated to fall another 10% in the second quarter, and sales volume is also expected to decrease by 17% compared to the previous quarter." He added, "Due to the decrease in utilization rate caused by demand slowdown, fixed cost burdens will increase, resulting in a cathode material operating profit margin of about 0.4% in the second quarter."

Although short-term earnings are disappointing, the stock price is expected to turn upward. The researcher said, "With the second quarter as the bottom, an upward earnings trend is expected going forward, and as consumption sluggishness and economic downturn are confirmed, expectations for interest rate cuts are expanding. If an alternative candidate participates in the U.S. presidential election instead of Joe Biden, Donald Trump's chances will decrease, and GM Equinox electric vehicles and Kia EV3 equipped with POSCO Future M's cathode materials are expected to show strong sales based on reasonable prices."

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