Electrification And Automation Will Transform Steel And Battery Markets

Key Takeaways

• Rapid cost restructuring, advanced automation, and technology adoption are set to drive significant margin expansion and profitability beyond typical market forecasts.
  
• Diversification into battery materials, decarbonization tech, and aggressive emerging market expansion will outpace rivals, ensuring robust, sustained top-line and earnings growth.
  
• Heavy reliance on core steel and delayed shift to growth sectors heighten exposure to market cycles, sustainability costs, and geopolitical risks, constraining profitability and future growth.

Catalysts

Operates as an integrated steel producer in Korea and internationally.

• Analyst consensus believes that POSCO's cost innovations and strategic moves in the steel business will improve margins, but this may be understated: rapid automation, AI-driven operational efficiencies, and divestment of chronic loss-makers like PZSS are likely to catalyze a step-change in cost structure, with significant, sustained net margin expansion above current projections.
  
• Analysts broadly agree that the lithium and energy materials ramp-up will drive future revenue, but the scale is likely underestimated: as new lithium plants in Argentina and Gwangyang reach full operational status and additional resource acquisitions close, POSCO's first-mover advantage amid an intensifying global battery materials shortage could drive exponential revenue and EBITDA growth, outpacing competitors as EV adoption and energy storage accelerate beyond current forecasts.
  
• With ongoing commercialization of proprietary decarbonization technologies such as HyREX and large-scale investments in hydrogen-based DRI, POSCO is positioned to capture premium pricing as stricter global carbon taxes and green steel mandates roll out, supporting above-industry-average margin gains for the long term.
  
• The company's aggressive geographical expansion into high-growth emerging regions, particularly through JV plants in India and Indonesia and mining/infrastructure investments, is set to materially expand the addressable market and enable double-digit revenue growth, de-risking dependence on Korea and OECD demand cycles.
  
• As global infrastructure spending surges and industrial electrification trends persist, POSCO's integrated model-combining steel, battery minerals, and advanced materials-will allow the company to cross-leverage customer relationships and secure long-term supply contracts, supporting multi-year visibility on top-line growth and sustained upward re-rating of earnings.

POSCO Holdings Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on POSCO Holdings compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming POSCO Holdings's revenue will grow by 11.3% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 0.7% today to 4.8% in 3 years time.
• The bullish analysts expect earnings to reach ₩4688.5 billion (and earnings per share of ₩61912.45) by about August 2028, up from ₩509.9 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 13.5x on those 2028 earnings, down from 45.6x today. This future PE is greater than the current PE for the US Metals and Mining industry at 10.6x.
• Analysts expect the number of shares outstanding to grow by 6.77% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.86%, as per the Simply Wall St company report.

POSCO Holdings Future Earnings Per Share Growth

Risks

• Reliance on core steel revenues and a slow transition to high-growth segments like battery materials means POSCO remains heavily exposed to global steel market cyclicality and price competition, elevating the risk of revenue and earnings volatility over the long term.
  
• Mounting global decarbonization pressures, evolving climate policies, and sustainability mandates are likely to necessitate expensive upgrades in production, such as the HyREX green steel projects, which may constrain net margins and depress return on capital for years to come.
  
• Persistent steel overcapacity in Asia, particularly from China, as well as the risk that Chinese government policies do not meaningfully reduce production, threaten to sustain downward price pressure and limit both topline growth and profitability for POSCO.
  
• Escalating geopolitical tensions and rising trade protectionism in the form of tariffs, antidumping duties, and export quotas in key end markets such as the US and Europe may restrict POSCO's market access and exert a negative impact on revenues and export margins.
  
• Large capital expenditure requirements for new projects, ongoing plant expansions, and lithium ventures, in combination with fluctuating raw material costs and uncertainty regarding ramp-up profitability in new battery and lithium investments, pose risks of capital overextension and lower future free cash flow, which could constrain dividends and limit earnings growth.

Valuation

• The assumed bullish price target for POSCO Holdings is ₩520000.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of POSCO Holdings's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₩520000.0, and the most bearish reporting a price target of just ₩225000.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be ₩98118.4 billion, earnings will come to ₩4688.5 billion, and it would be trading on a PE ratio of 13.5x, assuming you use a discount rate of 9.9%.
  
• Given the current share price of ₩307500.0, the bullish analyst price target of ₩520000.0 is 40.9% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.