[Click eStock] "POSCO Chemical, Record Quarterly Sales... Start of Rebound in Secondary Battery Material Business"

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[Asia Economy Reporter Lee Jung-yoon] Korea Investment & Securities maintained a buy rating and a target price of 180,000 KRW for POSCO Chemical on the 26th, stating that the company achieved record quarterly sales due to price increases and volume growth of cathode materials.

POSCO Chemical's provisional sales for the first quarter of this year rose 42% year-on-year to 664.6 billion KRW, while operating profit fell 25% to 25.5 billion KRW. The operating profit slightly missed the consensus estimate of 27.9 billion KRW.

This performance was made possible by increased sales volume of secondary battery materials. Researcher Kim Jung-hwan of Korea Investment & Securities explained, "Compared to the previous quarter, cathode material sales increased by 27% and anode material sales by 24%. Although material demand did not grow due to production disruptions at European automotive OEMs since the second half of last year, production has partially normalized, and secondary battery cell manufacturers are estimated to have resumed inventory accumulation of materials." The cathode material saw improved profit margins due to product price increases driven by rising costs.

Sales increased quarter-on-quarter due to price hikes in the core businesses of refractories and quicklime. However, profits related to quicklime and chemicals declined due to increased raw material costs and a slowdown in entrusted refining volume at the Hwaseong plant caused by the refurbishment of the No. 4 blast furnace at POSCO Gwangyang Steelworks.

Additionally, equity-method income of 9.2 billion KRW was generated from continued strong performance due to price increases of needle coke by affiliate PMC Tech and profit growth from the Chinese joint venture Zhejiang Pohwa.

POSCO Chemical is also expected to raise its production capacity targets for secondary battery materials. Researcher Kim said, "Cathode materials are planned to expand to 350,000 tons by 2025 and 610,000 tons by 2030 (targeting a 20% market share), and anode materials to 170,000 tons by 2025 (including 62,000 tons of artificial graphite) and 320,000 tons by 2030." He added, "Through raw material internalization (lithium, nickel, graphite, precursors, etc.) via POSCO group companies, the operating profit margin of the secondary battery materials business can ultimately be more than doubled compared to the current level."

Furthermore, POSCO Chemical's second-quarter sales are expected to rise 2% quarter-on-quarter to 679.5 billion KRW, with operating profit increasing 26% to 32.2 billion KRW. The recovery of core business and secondary battery material shipments is expected to accelerate, and profit margins for both cathode and anode materials are projected to improve compared to the previous quarter.

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