[Click eStock] "Posco Holdings with Poor Earnings, Immediate Rebound Difficult"

Meritz Securities: "Lack of Positive Catalysts... A Long-Term Approach Is Needed"

POSCO Holdings posted earnings in the fourth quarter of last year that fell short of securities firms' expectations. While there may be a temporary rebound in performance due to the elimination of one-off costs, concerns have been raised that there is a lack of clear stock price momentum given the overall uncertain market conditions.

On the 4th, Meritz Securities maintained its 'Buy' rating and target price of 380,000 KRW for POSCO Holdings against this backdrop. The closing price the previous day was 248,500 KRW.

POSCO Holdings reported a consolidated operating profit of 95 billion KRW in the fourth quarter of last year, down 68.8% year-on-year and 87.2% quarter-on-quarter. This was far below the market consensus of 582.6 billion KRW as well as Meritz Securities’ forecast of 473.6 billion KRW. Net loss amounted to 702.9 billion KRW, reflecting impairment losses of about 1 trillion KRW on low-profit assets. This was significantly below Meritz Securities’ estimate of 235.6 billion KRW.

Jang Jae-hyuk, a researcher at Meritz Securities, explained, "One-off costs of 230 billion KRW related to wage negotiations were reflected, along with operating losses from POSCO Engineering & Construction. Overseas steel and lithium inventory valuation losses reached 145 billion KRW, and subsidiaries generally posted weak results."

Although performance is expected to improve in the first quarter of this year due to the removal of one-off costs, there is an analysis that immediate stock price momentum is lacking. The steel division is forecasted to deliver results similar to those of the fourth quarter of last year. Overall profit margins are expected to decline due to lower negotiated prices for automotive steel sheets in the first half of this year compared to the second half of last year.

In the eco-friendly sector, POSCO’s nickel refining plant is scheduled to be completed in the first quarter, the Indonesian nickel smelting joint venture (JV) in the second quarter, and the second phase of brine lithium upstream and downstream processes in the third quarter of this year. Accordingly, the quarterly operating loss in the secondary battery materials division is estimated to remain at around 60 to 70 billion KRW throughout this year.

Researcher Jang said, "Apart from an overall improvement in market conditions, there is no significant immediate momentum. Since both the secondary battery materials and steel divisions need market environment improvements in the mid to long term to see substantial profit growth, a strategy with a somewhat long-term perspective will be effective."