[Click eStock] "POSCO Chemical's Cathode Material Sales to Triple in 3 Years... Target Price Up"

[Image source=Yonhap News]

[Asia Economy Reporter Hwang Yoon-joo] Korea Investment & Securities analyzed on the 29th that POSCO Chemical's sales will triple in three years. Accordingly, the investment opinion remains 'Buy,' but the target price was raised to 170,000 KRW.

Jung-hwan Kim, a researcher at Korea Investment & Securities, stated, "We are raising the target price by 21% by increasing the estimated supply volume of cathode materials to Ultium Cells (a joint venture between LG Energy Solution and GM)."

On the previous day (28th), POSCO Chemical announced a cathode material supply contract worth 13.8 trillion KRW for 2023 to 2025.

Researcher Kim said, "Considering the applied exchange rate and the contract price at the time (June 2022), it is estimated to be more than 200,000 tons of cathode materials over three years," and "The estimated supply volume of cathode materials to Ultium Cells by POSCO Chemical in 2025 is about 90,000 tons (over 60 GWh)," he analyzed.

He added, "The production capacity of Ultium Cells plants 1 to 3 will secure an annual production capacity of 135 GWh by the end of 2025, and based on the shipment timing and actual material usage (considering yield), POSCO Chemical's estimated market share within the customer in 2025 is about 50%."

Researcher Kim forecasted POSCO Chemical's total cathode material shipment volume for 2023, reflecting the Ultium Cells supply contract, to increase by 135% year-on-year to 83,000 tons, 136,000 tons (+63%) in 2024, and 194,000 tons (+43%) in 2025.

Applying the estimated price, the sales for 2023 are expected to increase by 93% year-on-year to 3.2 trillion KRW, 3.9 trillion KRW (+31%) in 2024, and 5.5 trillion KRW (+36%) in 2025.

Researcher Kim explained, "We raised the operating profit estimate for cathode materials by 61% to 193.9 billion KRW in 2023 and by 21% to 228 billion KRW in 2024," adding, "We also increased the profit margin estimate by reflecting the higher-than-expected volume for GM and the resulting increase in operating rate."