[Edaily Reporter Kim Hyung-il ] NH INVESTMENT & SECURITIES forecast that POSCO FUTURE M(003670)’s acquisition of customer approval to enter the lithium iron phosphate (LFP) market will serve as a short-term catalyst for its stock price. The firm maintained its “Hold” rating and raised its target price by 22% from the previous level to 180,000 won.

On the 16th, Joo Min-woo, an analyst at NH INVESTMENT & SECURITIES, stated, “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,” adding, “Entry into the LFP market will serve as a catalyst for a short-term stock price rebound.”

NH INVESTMENT & SECURITIES’ target price increase reflects a decline in the beta value and the valuation of the LFP joint venture, C&P New Materials. Reflecting the decrease in the beta value from 0.98 to 0.83, the weighted average cost of capital (WACC) was lowered from 5.9% to 5.6%. While C&P New Materials’ earnings outlook had previously been reflected in equity method income, it has now been incorporated into the valuation for the first time.

POSCO FUTURE M’s LFP production capacity is projected to reach 27,000 metric tons by 2027. This figure combines the company’s own production capacity of 15,000 metric tons with the joint venture’s capacity of 12,000 metric tons. If customer approval is secured, the company is projected to expand capacity through additional conversions to a total of 55,000 metric tons by the end of 2028—comprising 30,000 metric tons from its own operations and 25,000 metric tons from the joint venture.

However, considering valuation concerns, the investment rating was maintained at “Hold.” The lead analyst noted, “Even taking this into account, the stock is trading at a 162x price-to-earnings ratio (PER) and a 51x enterprise value-to-EBITDA (EV/EBITDA) ratio for 2028, representing an excessive premium compared to the sector averages of 40x and 15x, respectively.”

The firm projected that third-quarter earnings would fall short of market expectations due to the strong won and sluggish sales of cathode materials. NH INVESTMENT & SECURITIES projected third-quarter revenue of 735.2 billion won and operating profit of 16.8 billion won. Revenue is expected to decline 16% year-over-year but increase 8% quarter-over-quarter, with an operating margin of 2%. These figures fall short of the market consensus of 856.8 billion won in revenue and 26.8 billion won in operating profit.

Analyst Joo explained, “The sharp appreciation of the Korean won had a negative impact of approximately 10 billion won on operating profit, and cathode material sales volume is expected to fall short of expectations.” He estimated that a 10-won fluctuation in the exchange rate would affect quarterly operating profit by 1.3 billion won.

Third-quarter cathode material sales volume is projected to increase by only 22% quarter-over-quarter, falling short of the guidance of a 40% increase. This is because shipments of low-priced products for the IT sector are expected to be sluggish. Profitability is expected to remain at a low single-digit profit margin.

Sales of cathode materials are projected to grow by 6% quarter-over-quarter due to increased sales to Panasonic. However, as production levels remain below the break-even point (BEP), the company expects to continue posting a loss of 8.6 billion won.