[Click e-Stock] "POSCO Holdings Faces Subsidiary Uncertainty Concerns... Target Price Lowered"

Target Price Lowered from 500,000 Won to 490,000 Won

On October 16, Hanwha Investment & Securities stated that the provisioning issue at POSCO E&C, a subsidiary of POSCO Holdings, would act as a short-term uncertainty factor, and accordingly lowered its target price for POSCO Holdings from 500,000 won to 490,000 won. The investment opinion was maintained as 'Buy'.

Kwon Jiwoo, a researcher at Hanwha Investment & Securities, explained, "The scale of provisions at POSCO E&C remains undetermined, making it the biggest short-term uncertainty," adding, "We lowered the target price to reflect changes in earnings estimates related to POSCO E&C's provisions."

POSCO Holdings' third-quarter results for this year are expected to meet market expectations. Researcher Kwon stated, "On a consolidated basis, third-quarter sales are projected at 18.055 trillion won, down 1.5% year-on-year, and operating profit is expected to be 666 billion won, a decrease of 10.4%, in line with consensus (the average brokerage forecast). Operating profit in the steel segment is estimated at 632.2 billion won, which is expected to support the company's overall performance. While sales volume is estimated to have remained at a similar level to the second quarter due to the summer holiday season, the effect of lower raw material prices being reflected in input costs led to improved roll margins."

Operating profit in the infrastructure segment is expected to be 177.4 billion won, down 22.8% from the previous quarter. Researcher Kwon commented, "Uncertainty regarding provisions for the Shin Ansan Line at POSCO E&C is the biggest variable," adding, "Due to the suspension of all domestic worksites following the accident in the second quarter, POSCO E&C's sluggish performance has continued, and the recognition of large-scale provisions related to the Shin Ansan Line is expected to be greater in the fourth quarter than in the third."

The battery materials segment is projected to record an operating loss of 100.4 billion won, with the deficit expected to narrow compared to the second quarter.

Researcher Kwon added, "At least until the end of the year, short-term uncertainties such as the reduction of European quotas, the acquisition of HMM, and the finalization of POSCO E&C's cost scale may weigh on investor sentiment," and predicted, "The reduction of quotas and increase in tariffs in Europe are aimed at China, and the impact on POSCO Holdings' performance is expected to be limited compared to concerns."