Posco stock rating upgraded to buy at Nomura on corporate value-up plan

Nomura/Instinet upgraded Posco (NYSE:PKX), a prominent player in the Metals & Mining industry, from neutral to buy and raised its price target to KRW330,000 from KRW270,000 on Monday. According to InvestingPro data, analysts have set a target price of $58.43, suggesting significant upside potential from the current price of $46.60.

The upgrade follows Posco’s December 2024 disclosure of its Corporate Value-Up plan, which includes cancellation of 6% treasury shares over 2024-26, with 4% already cancelled in 2024-25. The remaining 4% treasury shares may be cancelled in the next one to two years, according to Nomura. The company’s strong financial position is reflected in its healthy current ratio of 1.88, indicating solid liquidity to meet short-term obligations.

The plan also includes divestiture of low-margin businesses and non-core assets, which is expected to generate cumulative proceeds of KRW2.1 trillion in 2024-25.

Nomura believes Posco will align its shareholder return policies with potential legal changes as Korea’s new government seeks to amend Commercial Law to strengthen minority shareholder rights.

The firm identified potential downside risks including worsening steel industry conditions due to China oversupply and the possibility of South Korean government deciding against anti-dumping imposition.

In other recent news, Posco’s earnings forecast has been updated by CFRA analyst Hazim Bahari, who raised the 2025 earnings per share (EPS) estimate to 4,429 Korean won, up from a previous forecast of 3,513 Korean won. However, the 2026 EPS prediction was slightly decreased to 5,509 Korean won from an earlier estimate of 5,589 Korean won. Bahari also revised the price target for Posco shares, increasing it to $36.00 from the previous $34.00, while maintaining a Sell rating on the stock. The analyst anticipates a revenue decrease of 2% for Posco in 2025, with a potential recovery of 5% in 2026. The operating profit margin is expected to see a modest rise, ranging from 3.7% to 4.2%. Despite near-term challenges, Posco’s strategic initiatives, such as joint ventures with Hyundai Motor (OTC:HYMTF) Group and JSW, are aimed at long-term growth. These ventures involve significant capital expenditures, with a planned investment of 8.8 trillion Korean won in 2025. Market conditions, including global steel oversupply and low lithium prices, are expected to delay Posco’s lithium project developments in Argentina to early 2026.

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