[E-Daily Reporter Kim Kyung-eun ] On the 3rd, Hana Securities raised its target price for POSCO FUTURE M(003670)by 14.6%, from 171,000 won to 196,000 won, citing increased medium- to long-term growth potential as shipments of lithium iron phosphate (LFP) cathode materials begin in earnest. The firm maintained its “Buy” rating.

Kim Hyun-soo, an analyst at Hana Securities, stated in a report released today, “POSCO FUTURE M is the only materials company that directly produces not only cathode materials but also anode materials and precursors, so we can expect operational synergies across its product lines.” He added, “The lithium production capacity of its parent company, POSCO Holdings, will also serve as a competitive advantage as the U.S. and Europe work to build supply chains independent of China.”

POSCO FUTURE M’s consolidated revenue for the third quarter of this year was 834.8 billion won, down 5% year-over-year but up 23% quarter-over-quarter. Operating profit was 82.1 billion won, up 23% year-over-year and 208% quarter-over-quarter. The operating profit margin was 9.8%, an improvement of 5.9 percentage points from the previous quarter.

Analysts note that the improvement in third-quarter earnings was largely driven by one-time gains. Shipments of cathode materials, which had been delayed in the second quarter due to customs clearance and administrative issues, were reflected in the third quarter, and compensation for unfulfilled shipment volumes was also included in revenue. Additionally, a reversal of valuation losses occurred as products for which valuation losses had previously been recognized were shipped to the low-price market in China.

Consequently, profitability is expected to slow in the fourth quarter as these one-time gains fade. Hana Securities projected fourth-quarter revenue of 808.4 billion won—a 45% increase year-over-year—and an operating profit of 17.1 billion won, marking a return to profitability. However, operating profit is expected to decline by 79% compared to the previous quarter.

The key driver of earnings improvement is the LFP cathode material business. POSCO FUTURE M plans to begin full-scale shipments of LFP cathode materials starting in the fourth quarter. The existing ternary cathode material business is also expected to maintain its profitable trend as shipment volumes for electric vehicles (EVs) and energy storage systems (ESS) remain steady.

Hana Securities estimates that POSCO FUTURE M’s LFP cathode material shipments will expand from 10,000 metric tons this year to 60,000 metric tons next year and 120,000 metric tons in 2028. The firm also raised its target price to reflect the growth potential stemming from the expansion of the LFP business.

However, analysts assess that the expansion of the LFP business is unlikely to lead to performance improvements as significant as those seen during the growth period of ternary cathode materials. This is because the selling price of LFP cathode materials is only about one-third that of ternary cathode materials. The report explains that even if LFP production capacity expands to over 200,000 metric tons annually by 2030, its contribution to revenue and profits may be lower than in the past.

Analyst Kim stated, “Over the past five years, POSCO FUTURE M has been valued at roughly twice the level of its competitors, and this premium is expected to continue,” but added, “The current stock price already reflects a significant portion of its future growth potential.” He further noted, “We recommend a trading strategy within a market capitalization range of 20 trillion won.”