POSCO Chemical: Vitality Supplies Enterprise on Observe 

The writer is an analyst of NH Funding & Securities. He could be reached at minwoo.ju@nhqv.com. — Ed.


Though POSCO Chem’s steel-related earnings for 1Q22 arrived sluggish on a hefty uncooked materials value burden, its power supplies enterprise delivered strong earnings in keeping with sturdy demand. Accordingly, the associated contributions to general OP reversed for the primary time within the agency’s historical past.

Preserve TP of W200,000

We preserve a Purchase ranking and a TP of W200,000 on POSCO Chem. We enhance our 2023~2025F earnings forecasts to replicate upward revisions to the power supplies enterprise (anode supplies + cathode supplies) capability. However, we adhere to our present TP on a decreasing of our goal a number of (24.0x → 21.7x) attributable to a decline in share costs for rechargeable battery materials friends. We improve our cathode supplies capability estimates by 25% (275,000 tons → 345,000 tons) for 2025 and 52% (400,000 tons → 610,000 tons) for 2030. In the meantime, we push up estimated capability for anode supplies in 2030 by 19% (260,000 tons → 310,000 tons). It’s anticipated that home and abroad enterprise cooperation with main prospects and new prospects (which type the idea for the capability upward adjustment) will materialize quickly.

Vitality supplies enterprise on monitor

POSCO Chem posted consolidated 1Q22 gross sales of W664.6bn (+42% y-y, +24% q-q), 25% above consensus, and OP of W25.5bn (-25% y-y, +25% q-q), 8% under the market projection. Its power supplies enterprise gross sales exceeded our estimate by 39%, driving company-wide gross sales progress. Nevertheless, the metal area confirmed sluggish margins attributable to value burden, with company-wide OP lacking consensus a outcome. In 2021, power supplies accounted for 34% of general OP, however as of 1Q22 the determine now hits 55%, exceeding that for metal. Each cathode and anode supplies noticed 1Q22 gross sales progress within the mid-20% q-q vary, however earnings enchancment for cathode supplies was extra pronounced because of mid-10% ASP hike results.

We forecast 2Q22 gross sales of W689bn (+43% y-y, +3% q-q; 21% over consensus) and OP of W27.6bn (-22% y-y, +8% q-q; 15% under consensus). Profitability on the agency’s metal enterprise is to stay tepid for now attributable to value burden, however q-q OP progress on the power supplies enterprise ought to proceed. In 2Q22, the power supplies enterprise’s OP contribution is more likely to increase to 62%. Shifting forward, the agency is to strengthen its mid/long-term enterprise competitiveness through: 1) enterprise portfolio growth (LFP, LLO, low-expansion anode, and so on); 2) the securing of recent purchasers; and three) easy development of upstream market entry.


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