[Click eStock] LG Reflects Value of Electronics and Chemical Affiliates... Target Price Raised by 31%

[Asia Economy Reporter Lee Seon-ae] Samsung Securities announced on the 21st that the reflection rate of LG's Net Asset Value (NAV) is unlikely to drop significantly to past levels, and thus set the target stock price 31% higher at 135,000 KRW.

LG's NAV reflection rate was extremely low at around 0.13 from April 2018 to December 23, 2020. During this period, the holding company barely reflected the stock price increases of key subsidiaries such as LG Chem. However, after December 23, the NAV reflection rate surged to about 0.6, actively reflecting the stock prices of subsidiaries compared to the past. Considering that the ratio of market capitalization to NAV is likely to be the NAV reflection rate, the NAV reflection rate of 0.6 is quite high given that the market capitalization was 34~40% of NAV.

Researcher Yang Il-woo of Samsung Securities stated, "The reason for the increase in LG's NAV reflection rate is that after LG Electronics decided to establish a joint venture with Magna, the market began to evaluate the electric vehicle-related business as part of LG Group's business, including not only LG Chem but also LG Electronics. Additionally, with increased exposure of Chairman Koo Kwang-mo related to M&A, investors started to have expectations for the new leadership."

Researcher Yang added, "From a global perspective, electric vehicle-related news flow is likely to continue, and LG's net cash as of the end of Q3 is high at 1.8 trillion KRW, increasing the possibility that LG may directly acquire new growth-related companies rather than through subsidiaries," and explained, "Applying an NAV reflection rate of 0.6 and an adjusted amount of 8.9 trillion KRW, the target stock price is raised by 31%, and the discount rate embedded in the target price relative to NAV is 50%."

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