[Edaily Reporter kyoungeun kim ] NH INVESTMENT & SECURITIES announced on the 16th that it is maintaining a “Hold” rating on POSCO FUTURE M(003670), which is poised to enter the lithium iron phosphate (LFP) market, and raising its target price by 22% from the previous level to 180,000 won.
Analysts expect the company to secure approval for its LFP products within the year with the help of global partners and begin full-scale mass production; they anticipate that entering the LFP market will serve as a catalyst for the stock price in the short term. However, the investment rating was maintained due to concerns over an excessive valuation premium.
Joo Min-woo, an analyst at NH INVESTMENT & SECURITIES, stated in a report released that day, “LFP approval will serve as a short-term catalyst for the stock price,” adding, “The company is preparing to enter the LFP market through collaboration with global partners, and is expected to secure customer approval and begin full-scale mass production within the year.”
In this scenario, next year’s production capacity is projected to be 27,000 metric tons (15,000 metric tons in-house + 12,000 metric tons via joint venture), but if customer approval is secured, it is expected to expand to 55,000 metric tons (30,000 metric tons in-house + 25,000 metric tons via joint venture) by the end of 2028 through additional capacity conversions.
Even taking this into account, the firm noted that the stock is trading at an excessive premium with a price-to-earnings ratio (PER) of 162 times for 2028 and maintained its “Hold” rating.
Regarding the target price increase, the firm explained, “We lowered the weighted average cost of capital (WACC) from 5.9% to 5.6% to reflect the decline in the beta value, and incorporated the LFP joint venture (C&P New Materials), which is accounted for using the equity method, into the valuation.” “While we had previously reflected C&P New Materials’ earnings outlook in our earnings forecast through equity method income, this is the first time we have incorporated it into the valuation,” the firm explained.
Meanwhile, POSCO FUTURE M’s third-quarter revenue is projected to be 735.2 billion won, a 16% year-over-year (y-y) decrease but an 8% quarter-over-quarter (q-q) increase. Operating profit is forecast at 16.8 billion won (operating profit margin (OPM) +2%), falling short of the consensus estimates (revenue of 856.8 billion won, operating profit of 26.8 billion won).
This is attributed to the sharp appreciation of the won, which had a negative impact of approximately 10 billion won on operating profit (1.3 billion won per quarter per 10 won), as well as the expectation that cathode material sales volumes will fall short of expectations.
He predicted, “Third-quarter cathode material sales volume is expected to increase by only 22% quarter-over-quarter due to sluggish shipments of low-priced products for the IT sector, falling short of the guidance (+40%),” adding, “Profitability is expected to remain at a low single-digit profit.”
On the other hand, he projected that anode material sales would continue to grow by 6% quarter-over-quarter due to increased sales to Panasonic; however, a loss of 8.6 billion won is expected to persist due to operating rates falling short of the break-even point (BEP).