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Lower expectations for 4Q25; earnings likely to normalize in 2026

4Q25 preview: Lower expectations

For 4Q25, we expect POSCO Holdings to post consolidated revenue of W17tr (-4.5% YoY) and operating profit of W342.1bn (+258.6% YoY), with the latter likely missing the consensus (W457.2bn) by more than 20%. Domestic ASP likely declined due to weaker demand and delays in customer inventory drawdowns. While export ASP likely climbed on a higher USD/KRW rate, we estimate company-wide ASP still declined slightly QoQ. Shipment volumes also likely fell more than 3% QoQ, hurt by softer demand and routine maintenance. In the energy materials business, we estimate that operating losses widened QoQ, as shipments declined amid inventory adjustments at POSCO Future M’s customers. Meanwhile, at POSCO E&C, factors such as the Sinansan Line accident (and resulting construction suspension) and loss provisions for unsold housing units likely led to more than W200bn in cost recognition for a second consecutive quarter. We also estimate pretax profit swung to negative territory, reflecting restructuring-related asset impairment losses (which have historically been recognized in the fourth quarter).

Positive 2026 earnings trajectory remains intact

In 2026, we forecast operating profit to increase 46% YoY to W3.14tr. In the steel segment, ASP gains from the imposition of antidumping duties on hot-rolled steel should become more pronounced as customer inventories are depleted, driving spread expansion. In the energy materials business, we expect losses to narrow toward breakeven as lithium prices recover and ramp-ups conclude. For POSCO E&C, earnings uncertainty is likely to persist through 1Q26 due to the fallout from the Sinansan Line accident in Yeouido in Dec. 2025 (the second major accident involving this project during 2025). That said, the company recognized more than W400bn in associated costs in 2025, which should create a favorable base for this year.

Maintain Buy and TP of W430,000

We maintain our Buy rating and target price of W430,000 on POSCO Holdings. Despite production cuts in China, any industry upturn is likely to be muted given the slow recovery in demand. Nevertheless, earnings normalization should support a share price recovery. Meanwhile, POSCO Holdings announced an equity investment in Hyundai Motor Group’s electric arc furnace project in the US (20% stake), and we expect greater visibility on further overseas initiatives (e.g., upstream investments in India and the possible acquisition of an equity stake in the US’s Cleveland-Cliffs).