[Edaily Reporter Shin Ha-yeon ] On the 13th, Yuanta Securities Korea assessed that POSCO INTERNATIONAL(047050)is demonstrating greater sustainability in earnings growth as the profit contribution from its energy and palm oil businesses expands. The firm projected that the profit growth trend will continue into next year, driven by increased production from existing investment assets combined with the acquisition of new energy assets. It maintained its “Buy” rating and target price of 112,000 won.
Son Hyun-jung, an analyst at Yuanta Securities Korea, stated, “Considering that the investment performance of the palm oil and SENEX businesses has been confirmed and new energy assets are being added, we believe the sustainability of profit growth has not been fully reflected in the stock price.”
Yuanta Securities Korea estimated that POSCO INTERNATIONAL’s consolidated revenue for the third quarter of this year would reach 8.5983 trillion won, a 3.8% increase year-over-year. Operating profit is expected to rise 35.6% to 388.2 billion won, in line with the market consensus of 382.0 billion won. The operating profit margin is projected to rise 1.0 percentage points year-over-year to 4.5%.
In particular, the firm forecast that profit growth in the energy business would be notable. Third-quarter operating profit for the energy division is estimated at 250.7 billion won, up 27.0% year-over-year and 10.7% quarter-over-quarter. This growth is driven by increased profits from the power generation business and SENEX, the Australian natural gas production subsidiary, which offset the quarter-over-quarter decline in profits from the Myanmar gas field.
Operating profit from the Myanmar gas field is expected to reach 90.9 billion won, a 1.0% increase year-over-year but a 38.6% decrease quarter-over-quarter. Analyst Son explained, “Although profits are expected to decline quarter-over-quarter due to the strong won and a lower cost recovery ratio compared to the previous quarter, the expanded recovery of investment costs from Phase 4 development is expected to support year-over-year profit growth.”
In contrast, the power generation business is projected to post an operating profit of 76.8 billion won, a 104.9% increase from the previous quarter, driven by the summer peak season effect and strong wholesale electricity prices (SMP) in July and August. SENEX is also estimated to report an operating profit of 46.8 billion won, a 75.0% year-over-year increase, due to higher production.
Analyst Son stated, “We expect the profit growth from the power generation and SENEX segments to offset the quarter-over-quarter profit decline in Myanmar,” adding, “Despite the sluggish performance of the steel and trading subsidiaries, the expanding profit contributions from the energy and palm oil segments are expected to support the company’s overall profitability.”
The palm oil business in Indonesia has also established itself as a key driver of earnings growth. Operating profit for the Indonesian palm oil business in the third quarter is expected to reach 75.7 billion won, a 400.0% increase year-over-year. This result stems from the combination of strong harvests at the existing PT. BIA plantation and the inclusion of PT. PAR, where harvest volumes are expected to increase in the second half of the year.
Analyst Son noted, “While there are differences in profitability between farms, the traditional pattern of higher profits in the first half and lower profits in the second half is easing due to the diversification of production periods,” adding, “Increased production at the palm oil and SENEX operations is driving profit growth, and the contribution to earnings from existing investment assets is growing.”
This growth trend is expected to continue next year. Yuanta Securities Korea estimates that POSCO INTERNATIONAL’s 2027 revenue will reach 37.2762 trillion won, a 7.9% increase from this year, while operating profit will rise 10.8% to 1.6005 trillion won. The firm anticipates that growth will be supported by increased production at SENEX, the commencement of operations at the Gwangyang No. 2 Liquefied Natural Gas (LNG) Terminal, and expanded palm oil production.
The acquisition of new energy assets is also a notable factor. POSCO INTERNATIONAL signed an agreement last September to acquire Marcellus shale gas assets in the U.S. and aims to close the deal this November. Since these assets are already in production, gas sales profits can be added immediately following the acquisition, and the company plans to expand its North American operations by linking them with liquefaction and LNG trading in the future.
Analysts note that despite these growth prospects, the stock remains undervalued. Based on the closing price of 54,800 won on the 12th, POSCO INTERNATIONAL’s projected price-to-earnings ratio (PER) for 2027 stands at approximately 9 times. The stock has upside potential of about 104% to reach the target price of 112,000 won.
Analyst Son stated, “Considering that the investment returns from Palm and SENEX have been confirmed and new energy assets are being added, we believe the sustainability of profit growth is not fully reflected in the stock price,” and maintained a “Buy” rating and the target price.