[Click eStock] “POSCO Chemical Reflects Ultium Cells Supply Effect... Target Price Up 12%”

Yuanta Securities Report

[Asia Economy Reporter Minji Lee] Yuanta Securities maintained a buy rating on POSCO Chemical on the 29th and raised the target price by 12% from the previous level to 220,000 KRW. This reflects the need to reassess the company's fair value as the secondary battery sector is factoring in expectations for 2024 earnings.

The company's expected Q3 performance is projected to show sales of 506.2 billion KRW, a 5.5% increase from the previous quarter, while operating profit is forecasted to decline by 0.8% to 35.3 billion KRW. Secondary battery material sales are expected to reach 223.5 billion KRW (182.2 billion KRW for cathode materials and 50.3 billion KRW for anode materials). Despite front-end demand contraction due to vehicle semiconductor shortages, supply is increasing compared to the previous quarter, indicating a moderate growth trend.

Considering the effect of material supply to the U.S. Ultium Cells, the total expected cathode material shipment volume for 2024 is around 120,000 tons. The company is predicted to improve profitability with increased shipment volume, with total operating profit expected to reach approximately 500 billion KRW.

The U.S. Ultium Cells Plant 1 (35GWh) is scheduled to begin operations in 2023, and by the second half of 2024, Plant 2 (35GWh) will be included, operating at a 70GWh capacity. Researcher Kwangjin Kim of Yuanta Securities stated, “Although the company is understood to have negotiated supply only for Plant 1, considering it is essentially a sole cathode material supplier, the possibility of securing orders for Plant 2 is also high,” adding, “Supply to Ultium Cells is expected to surge from 30,000 tons in 2023 to over 80,000 tons in 2024.” The 1.8 trillion KRW contract with LG Energy Solution is expected to recognize about 1 trillion KRW in sales by the end of this year, indicating the need for additional large-scale orders.

Researcher Kwangjin Kim commented, “Last year, the company's stock price showed a notably steep rise compared to other companies due to order news, which acted as a factor for relative exclusion in this year's secondary battery sector rally,” and added, “As the secondary battery sector has recently begun reflecting expectations for 2024 earnings growth in stock prices, it is time for a reassessment of the fair value.”