POSCO affiliates’ shares surge; market cap rises threefold in 5 years

Shares of POSCO Group affiliates are flying high with the steelmaker rapidly transforming into a battery materials manufacturer, riding the industrywide pursuit of eco-friendly businesses.

POSCO Holdings Inc., the holding firm of South Korea’s largest steelmaker, finished up 16.5% at 642,000 won on Monday, outperforming the broader benchmark index Kospi’s 0.7% gain.

With that share price, the company’s market capitalization rose to 54.38 trillion won ($42.4 billion), replacing Samsung Biologics Co. as the main bourse’s fourth-largest stock.

POSCO Holdings is the Kospi market’s top pick with individual investors buying a net 6.6 trillion won in shares so far this year. This month alone, the stock has risen 65.5%.

The holding company’s affiliates have also performed better than most Kospi-listed shares.

POSCO International Corp., the group’s general trading arm, rose by the daily limit of 30% to 66,000 won on Monday. POSCO Future M Co., the group's battery materials subsidiary, closed 10.5% higher at 542,000 won, while software developer POSCO DX Co. ended up 7.4% at 33,500 won.

Year to date, POSCO Holdings has advanced 132%, while POSCO Future M has risen 201%. POSCO International and POSCO DX have gained 192% and 436%, respectively.

MOST COVETED AMONG INVESTORS

Alongside EcoPro Co. and its affiliates, POSCO Group units are among the top picks by Korean investors in recent weeks as the steelmaker conglomerate is striving to turn into a battery-related business.

Just a few years back, POSCO Holdings was seen as a typical smokestack industry player, unpopular among retail investors, particularly after China emerged as the global steel industry leader.

China’s presence in the steel industry is so powerful that international prices of hot-rolled steel, a key POSCO product, are set in the Chinese yuan currency.

POSCO’s share price had been boxed in the 150,000 won to 300,000 won range for years.

With Choi Jeong-woo assuming the group’s chairmanship in July 2018, however, POSCO set its sights on secondary batteries and battery materials as its key growth drivers.

The company has since increased its investment in facilities processing nickel and lithium, major battery raw materials.

POSCO Future M has strengthened its raw materials business covering precursors, cathodes and anodes. The company has secured 83.5 trillion won in cathode manufacturing orders so far this year.

“Shares of POSCO Group affiliates have become hot battery-themed stocks. Those stocks are really flying these days,” said the chief executive of a local asset management firm.

Higher earnings also back POSCO companies’ share prices.

POSCO Holdings said on Monday its second-quarter operating profit soared 85.7% year on year to 1.3 trillion won.

POSCO International said it posted a 357.2 billion won operating profit in the April-June period, the company’s all-time high for a second-quarter profit.

For POSCO DX, its upcoming listing on the main bourse also lifted its share price on Monday, analysts said.

“The rising lithium price trend and POSCO Holdings’ planned production of lithium next year will continue to drive its shares in the coming years,” said Meritz Securities analyst Jang Jae-hyeok.

OVERHEATING

The combined market cap of six POSCO affiliates, including POSCO Holdings, POSCO Future M, POSCO International and POSCO DX, stood at about 115 trillion won on Monday, a more than threefold increase from 35. 2 trillion won in July 2018, when Choi became the group chairman.

Some industry analysts, however, cautioned against heaving buying of POSCO shares, saying that the stocks have shown signs of overheating.

POSCO Future M, for example, has a price-earnings ratio of 102.9, much higher than the battery materials industry average.

Korean battery materials makers’ heavy reliance on China is also a concern.

According to the Korea Customs Service, about 85% of nickel, lithium, cobalt and graphite – key raw materials for cathodes and anodes – were imported from China last year.

“Theme stocks, typically bio stocks, have often surged over a short period. However, many of them plummeted quickly, dealing a heavy blow to retail investors. People need to be careful with battery shares too,” said a fund manager.

Write to Man-Su Choe and Jae-Fu Kim at bebop@hankyung.com

In-Soo Nam edited this article.