[Into the Stock] LG Chem's Endless Downturn... Attractiveness Beyond Batteries

Stock Price Halved Since Early Year... Down About 9% This Month
Battery 'Leader Stock' Premium Disappears After LG Energy Solution IPO
Secondary Battery Material Business Remains Strong... Attention Needed on Eco-Friendly and Chemical Sectors

[Asia Economy Reporter Minwoo Lee] LG Chem's stock price has been unable to escape a continuous downward trend. This is interpreted as the value assessment it received as a secondary battery manufacturer disappearing as the listing of LG Energy Solution, established through the physical division of the battery business division, approaches. However, since the chemical and life sciences businesses remain solid and the secondary battery materials business is also ongoing, there is an analysis that the company's fundamentals are sufficiently strong.

According to the Korea Exchange on the 23rd, LG Chem hit a 52-week low of 622,000 KRW during trading the previous day. This is the lowest level since the intraday low of 588,000 KRW recorded on November 2 last year. Compared to the all-time high of 1,050,000 KRW recorded earlier this year, it has fallen by more than 40%. This decline has continued steadily since the beginning of the year, accelerating particularly since last month. It dropped 16.99% last month alone and has fallen more than 9% so far this month.

The listing of LG Energy Solution dealt a direct blow. LG Energy Solution will finalize its public offering price through institutional investor demand forecasting on January 11-12 next year. The expected price range is 275,000 to 300,000 KRW. Based on the upper limit, the market capitalization would be 70 trillion KRW, the largest IPO in South Korea's history. If the opening price exceeds the public offering price by about 32%, it could surpass SK Hynix to become the second-largest by market capitalization. This is why it is evaluated that the premium LG Chem enjoyed as the leading secondary battery manufacturer has been fully taken over by LG Energy Solution, cooling investor sentiment toward LG Chem.

Nevertheless, there is an analysis that the current stock price is excessively undervalued. The value of the chemical and life sciences businesses is barely reflected, and the stock price even reflects a holding company discount. Additionally, since the secondary battery materials sector remains robust, there is a view that LG Chem can benefit from the expansion of the secondary battery market in the future. Lee Dong-wook, a researcher at Kiwoom Securities, explained, "LG Chem's battery materials division sales, which were about 200 billion KRW in 2016, are estimated to increase to about 1.7 trillion KRW this year, growing at an average annual rate of over 50% over the past five years," adding, "This is because the performance of the main business, cathode materials, has greatly improved as LG Energy Solution's secondary battery production capacity has surged amid the growth of the electric vehicle market driven by strengthened government policies worldwide."

In addition to existing cathode materials, LG Chem is expanding its business areas by investing in separators and carbon nanotube (CNT) conductive materials, positioning itself to become a key player in secondary battery materials after LG Energy Solution's listing. Anna Lee, a researcher at Ebest Investment & Securities, emphasized, "Even after LG Energy Solution's listing, LG Chem's own business structure remains competitive," and added, "The eco-friendly materials business is expected to become a core player in the global market through vertical integration by product, and the secondary battery materials division is continuously investing to establish a meaningful portfolio."

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