Market: KOSPI (005490)
Brokerage : Shinhan Securities
Analyst : Gwang-rae Park, Seunghun Han
Investment Rating : BUY (Maintained)
Target Price : 440,000 KRW (Raised)
Core Momentum : Full-scale operation of the Argentina Lithium Plant 1 and rising lithium prices, along with the deconsolidation of China PZSS and potential treasury share cancellations, are expected to drive a structural earnings turnaround following the 4Q earnings trough.
📊 1. [Valuation & Key Financial Metrics]
- Rating & Target Price: Maintained BUY rating, raising the target price by 10% to 440,000 KRW to incorporate potential treasury share cancellations despite downward adjustments to earnings estimates (offering a 20.9% upside from the base price of 364,000 KRW).
- Key Valuation Multiples:
- 2026F: P/E 16.3x, P/B 0.5x, EV/EBITDA 7.0x, Dividend Yield (DY) 2.7%, ROE 3.2%
- 2027F: P/E 13.0x, P/B 0.5x, EV/EBITDA 6.5x, Dividend Yield (DY) 2.7%, ROE 4.0%
- Annual Financial Forecasts:
- 2026F: Revenue of 71.76T KRW, Operating Profit of 3.05T KRW (+66.9% YoY), Controlling Net Profit of 1.80T KRW
- 2027F: Revenue of 74.12T KRW, Operating Profit of 3.56T KRW, Controlling Net Profit of 2.27T KRW
🚀 2. [Market Opportunities & Business Outlook]
- 4Q25 Earnings Review:
- Consolidated operating profit came in at 12.6B KRW (-98.0% QoQ), significantly missing market expectations (394.8B KRW).
- Steel: POSCO standalone operating profit fell to 336.0B KRW (-42.6% QoQ). Despite a slight ASP increase (+~5,000 KRW/ton), rising input costs and facility maintenance reduced shipments by 524k tons, weighing on profitability.
- Overseas Steel: Chronic loss-maker China PZSS (anti-monopoly business combination approval completed in China in Dec 2025) is undergoing divestment and will be excluded from consolidated results in 2026.
- Subsidiaries & Materials Losses: POSCO E&C recorded an operating loss of -190.0B KRW (third consecutive quarter of losses). Battery materials posted a -160.0B KRW operating loss due to low utilization and weak volumes (POSCO Future M -52.0B KRW, Pilbara Lithium Solution -46.0B KRW, POSCO Argentina -55.0B KRW).
- 2026 Earnings Recovery Drivers:
- Full-year operating profit is projected to recover to ~3.0T KRW.
- An ~800.0B KRW YoY profit increment can be secured solely via base effects from POSCO E&C’s 452.0B KRW operating loss, the exclusion of PZSS (-200.0B KRW drag), and battery materials loss contraction (130.0B KRW).
- Meaningful steel ASP increases starting in 2Q will provide additional margin expansion.
- Lithium Strategic Monitoring: Full-capacity utilization of Argentina Plant 1 and rising lithium prices remain essential prerequisites for valuation re-rating as a core global materials producer, with post-April lithium price trajectories serving as a key variable.
📝 Editor’s Comment (Perspective)
The analyst views POSCO Holdings as an enterprise that has cleared its 4Q earnings trough and is now positioning for a structural valuation re-rating as a premier global materials company, driven by the divestment of chronically unprofitable assets (China PZSS) and the full-capacity operation of Argentina Lithium Plant 1. This perspective places greater emphasis on the baseline operating profit recovery to the 3.0T KRW range—unlocked by structural loss elimination and subsidiary base effects—as well as corporate shareholder value enhancement via potential treasury share cancellations, rather than transient 4Q earnings weakness.
To verify whether this investment thesis continues to materialize, investors should monitor the realization of full-capacity operations at Argentina Lithium Plant 1 alongside the post-April lithium price trajectory, the formal closing and deconsolidation of China PZSS, the profit turnaround at POSCO E&C, and the tangible execution of treasury share cancellations. These developments can be tracked through upcoming quarterly earnings releases, official IR presentations, and regulatory filings.
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