[Click e-Stock] "LG Sangsa, Noted as a Major Subsidiary of the Newly Established Holding Company"

[Asia Economy Reporter Oh Ju-yeon] NH Investment & Securities raised its investment opinion on LG Sangsa from 'Hold' to 'Buy' and increased the target price from 16,300 KRW to 33,000 KRW, stating that LG Sangsa will be spotlighted as a major subsidiary of the newly established holding company.

According to LG's plan for a spin-off, LG Sangsa will be incorporated as a subsidiary of the new holding company along with LG Hausys, Silicon Works, and LG MMA by the end of May, and will be separated from LG. NH Investment & Securities expects that since existing shareholders will become shareholders of both LG's existing holding company and the new holding company, LG Sangsa's logistics and trading business targeting LG's existing holding company affiliates will see little change even after the spin-off.

Additionally, factors such as swift decision-making, the visibility of Pantos's IPO, LG Sangsa's new business initiatives, expanded synergy within the new holding company, and enhanced shareholder value are considered positive expectations.

With continued strength in the logistics business and a sharp rise in coal and palm prices since the end of 2020, LG Sangsa's operating profit this year is expected to exceed 200 billion KRW for the first time since 2017, reaching 219.6 billion KRW.

While the decarbonization of the energy and palm businesses is a challenge amid the expansion of socially responsible investment, LG Sangsa is pursuing new businesses such as LNG terminal projects and healthcare, and it is explained that synergies can be expected with affiliates operating various businesses within the new holding company based on logistics and trading functions.

In particular, Pantos, in which the controlling shareholder family sold a 19.9% stake at the end of 2018, is expected to go public as its performance improves (operating profit increased from 95.9 billion KRW in 2018 to 167.9 billion KRW in 2020). Dongyang Kim, a researcher at NH Investment & Securities, said, "Upon the IPO of the consolidated subsidiary Pantos, LG Sangsa is expected to realize the value of the subsidiary and receive cash inflows from some existing share sales."

Meanwhile, LG Sangsa's sales in the fourth quarter of 2020 are estimated to have increased by 2% year-on-year to 2.6543 trillion KRW, and operating profit is expected to have surged by 2,428% to 41.9 billion KRW, exceeding market consensus.

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