[Click e Stocks] "POSCO, Neutral on Stock Price Regarding Physical Division"

[Asia Economy Reporter Song Hwajeong] Kiwoom Securities maintained a 'Buy' rating and a target price of 440,000 KRW on POSCO, viewing the issue of transitioning to a holding company through a physical division as neutral for the stock price, with an expectation of a turnaround in the Chinese steel industry in the first half of next year.

On the 10th, POSCO's board of directors decided to split into POSCO Holdings (holding company, surviving entity) and POSCO (business company, newly established entity). The split method is a physical division where POSCO Holdings will hold 100% of POSCO's shares. After the split, only POSCO Holdings will remain listed, while POSCO will become unlisted. If the extraordinary shareholders' meeting on January 28 next year passes, the split will be completed as of March 1. The company stated that the purpose of the holding company split is to overcome the limitations of the steel-centered business structure, accelerate group growth, and re-evaluate corporate value for new growth businesses through improved perception.

The management promised to maintain the split business company POSCO as a 100% unlisted subsidiary and to avoid raising funds through listing the business subsidiary, instead executing funding led by the holding company, including rights offerings if necessary, to fundamentally prevent conflicts of interest between holding company and subsidiary shareholders after the split. Analyst Lee said, "In the case of battery companies whose stock prices fell after recent physical divisions, large-scale facility investments necessitated fundraising through selling shares of the business subsidiary, inevitably weakening the controlling company's control over the business company. However, POSCO does not require large-scale investments in the steel business, so there is no reason for the business company to raise funds through share sales after the split," adding, "Therefore, there is no need to interpret POSCO's stock price too pessimistically just because the physical division was announced."

POSCO's transition to a holding company is expected to hinge on approval at next year's shareholders' meeting. Analyst Lee explained, "For the split plan to pass the extraordinary shareholders' meeting, approval from at least two-thirds of the attending shareholders and at least one-third of the total issued shares is required," adding, "As of the end of Q3, the largest shareholder of POSCO is the National Pension Service with 9.75%, and there are no other major shareholders holding more than 5%, so securing consent from the dispersed shareholders will be critical."