[Click eStock] LG Chem Target Price Sharply Lowered from 550,000 KRW to 330,000 KRW

Reflecting Production Disruptions at European Factories Due to COVID-19

[Asia Economy Reporter Minwoo Lee] Due to the impact of the novel coronavirus infection (COVID-19), LG Chem's target stock price has been significantly downgraded.

On the 20th, Samsung Securities announced that it would lower LG Chem's target stock price from the previous 520,000 KRW to 330,000 KRW. This analysis considered the stock price drop, which was greater than the recent two-week KOSPI decline of 30%. LG Chem's stock price, which was 412,000 KRW on the 5th, fell to 230,000 KRW the day before.

This decline is analyzed to be due to the suspension of production at European factories caused by COVID-19. Although the yield of the production lines expanded last year has entered a stabilization phase and yield work on this year's expanded lines is proceeding as planned, the shutdown of European automakers inevitably limits shipment volumes. Hyunryul Cho, a researcher at Samsung Securities, said, "There may be some impact on electric vehicle sales until the second quarter of this year," adding, "If the Polish government orders a factory shutdown in the future, shipment volumes could decrease again."

There is also a financial burden. Last year's net borrowings increased significantly to 6.48 trillion KRW from 2.81 trillion KRW the previous year. Researcher Cho explained, "However, in the first quarter of this year, 500 billion KRW was secured through the sale of non-core assets such as the Beijing Twin Towers in China," and added, "In December last year, a financial agreement was signed with the Korea Development Bank for overseas battery expansion, which is a contract allowing borrowing up to 5 billion USD when needed, positively contributing to liquidity."

Samsung Securities forecasts LG Chem's operating profit for the first quarter of this year at 165.1 billion KRW. Although this is 10% below the previous forecast of 182.6 billion KRW, it is considered favorable compared to the recent market consensus (average estimate in March of 76.5 billion KRW). Researcher Cho said, "We expect investment sentiment to recover sharply through stabilization of financial market volatility and easing of the COVID-19 spread in Europe, so we maintain a 'Buy' rating," and recommended, "In case of further adjustments, we suggest purchasing in installments."

This content was produced with the assistance of AI translation services.