KB Securities said on the 30th that for POSCO FUTURE M, attention should be paid to whether it secures orders and mass-production competitiveness for lithium iron phosphate (LFP) for energy storage systems (ESS).
At the same time, it maintained its investment opinion of "Buy" and raised the target price to 280,000 won from 270,000 won. POSCO FUTURE M's closing price the previous day was 235,000 won.
POSCO FUTURE M said in a preliminary disclosure the previous day that in the fourth quarter of last year (October to December) it posted revenue of 557.6 billion won and an operating loss of 51.8 billion won. Revenue fell 23% from a year earlier, and the continued operating loss came in below market expectations.
According to KB Securities, for cathode materials, selling prices declined from the previous quarter while sales volume plunged 58%. This was because demand fell sharply after key client General Motors (GM) decided to shut down its Ultium Cells plant in the first half of this year.
For anode materials, sales volume showed little change from the previous quarter, but there was an impact from lower selling prices due to price competition with Chinese companies. In addition, there was a large one-off impairment loss related to synthetic graphite.
KB Securities projected first-quarter results this year at revenue of 614.6 billion won and operating profit of 11.3 billion won. That would be down 27% and 34% from a year earlier, respectively.
Lee Chang-min, an analyst at KB Securities, said, "A rebound in cathode material sales volume is expected," adding, "Shipments of NCA for ESS for Samsung SDI are likely to increase from the previous quarter, and shipments of N65 for Ford in Europe and N87 for Hyundai Motor are also estimated to recover from the fourth quarter, which was affected by customer inventory adjustments."
For the full year, it presented revenue of 3.15 trillion won, up 7% from a year earlier, and operating profit of 81.8 billion won, up 149%.
The analyst said, "Given the high proportion of U.S. customers, a conservative approach is needed for the time being on the shipment trends of cathode and anode materials when considering the fallout from the end of the Inflation Reduction Act (IRA)," adding, "Whether the company secures orders and mass-production competitiveness for LFP for ESS will determine the pace of earnings recovery going forward."