POSCO Future M: Anode Materials as a Bargaining Chip in the LFP Transition

SK Securities reiterated its buy recommendation and target price of 300,000 won on POSCO Future M (KOSPI: 003670) on the 5th, implying upside of 110.1% from the stock's closing price of 142,800 won on the 4th.

The company's operating profit for the second quarter of 2026 came in at 26.7 billion won, a 3,351% increase year on year. Yet both revenue (679.5 billion won) and operating profit fell short of market consensus estimates of 816.0 billion won and 29.0 billion won respectively. SK Securities attributed the miss to two factors: the absence of cathode material shipments destined for General Motors' Ultium Cells joint venture, and the delay of next-generation N87 cathode shipments — pushed back to the third quarter owing to sluggish sales at a key customer and operational difficulties at an overseas plant.

Despite the shortfall, the energy materials division swung to a profit of 2.5 billion won. An inventory revaluation gain on raw materials of roughly 10 billion won was the primary driver. Anode material sales volumes also doubled from 2,500 tonnes in the previous quarter to 5,000 tonnes, as overseas shipments recovered and the division narrowed its losses. SK Securities projects third-quarter operating profit at 27.4 billion won.

The more significant development, however, is the revision to the full-year 2026 operating profit forecast. SK Securities has raised its estimate to 96.2 billion won, up 33.3% from its prior estimate of 72.0 billion won. That would represent a near-threefold recovery from the 32.8 billion won recorded in 2025, though it still trails the market consensus of 100.0 billion won by roughly 4%. The brokerage forecasts operating profit of 193.0 billion won in 2027, marking the beginning of a more substantial growth phase.

The LFP bottleneck argument

SK Securities's central thesis for naming POSCO Future M its top pick among cathode material producers rests on scarcity value during the industry's shift towards lithium iron phosphate (LFP) chemistry. The battery market is moving rapidly away from ternary chemistries — nickel-cobalt-manganese (NCM) and nickel-cobalt-aluminium (NCA) — towards LFP. Genuine demand for LFP cathode materials destined for North American energy storage systems (ESS) is expected to materialise from 2027, yet newly commissioned facilities currently under construction are unlikely to be operational by then. Converting existing ternary production lines to LFP is, in practice, the only viable means of meeting that demand in time.

This is where anode materials become strategically significant. In ESS-grade LFP batteries, anode materials account for a proportionally higher share of total costs than they do in ternary EV battery cells. As battery cell manufacturers work to satisfy requirements for non-Chinese sourced materials, anode supply is emerging as a critical bottleneck. SK Securities states that POSCO Future M is the only domestic company capable of simultaneously resolving both the LFP precursor and anode material supply constraints. Should the company succeed in securing package contracts covering both cathode and anode materials, the brokerage believes this could serve as a catalyst for a meaningful re-rating of the stock.

Precursor procurement is a further differentiating factor. POSCO Future M sources precursors through C&P Advanced Materials, a joint venture with China's CNGR and Fino, giving it a structurally stable supply chain. Over the medium to long term, the company aims to commercialise a lower-cost LFP production process, backed by the broader resources of the POSCO group.

Risks and the road ahead

Investors should note that considerable time will be required before this thesis plays out. The anode materials division is expected to post an operating loss of 14.2 billion won for the full year 2026, with a return to profitability not forecast until 2027. Cathode material utilisation rate targets are equally gradual — 50% in 2027, rising to 70% in 2028. It also remains unclear when the gap left by Ultium Cells will be filled; shifts in GM's electric vehicle strategy could once again disrupt POSCO Future M's North American cathode shipment schedule.

The share price tells a sobering story. At 142,800 won, the stock trades at less than half its 52-week high of 296,000 won and is down 27% year to date, placing it among the weakest performers in the domestic battery materials sector. The 110% gap between the current price and SK Securities's target reflects how little of the brokerage's medium-term recovery scenario has yet been priced in by the market. Investors would do well to monitor the pace of LFP adoption, the prospect of package supply agreements, and the timeline for the anode business's return to profitability.