[Click eStock] "LG Chem, True Value Revealed Especially in Difficult Times"

[Asia Economy Reporter Kwon Jaehee] Kiwoom Securities maintained its 'Buy' rating on LG Chem on the 7th, setting a target price of 850,000 KRW.

Kiwoom Securities forecasted LG Chem's operating profit for Q1 this year to reach 840.6 billion KRW, a 12.3% increase compared to the previous quarter. This exceeds market expectations. Despite negative factors affecting performance such as the sharp rise in oil and metal prices, this is interpreted as the effect of the ongoing business portfolio improvement.

By business segment, the petrochemical division's operating profit is expected to decrease by 16.3% quarter-on-quarter to 574.1 billion KRW. This is due to the rise in raw material prices caused by the surge in oil prices, reduced cracker operating rates due to profitability deterioration of the Naphtha Cracking Center (NCC) and Polyolefin (PO). Additionally, the spread of high value-added synthetic resins such as Acrylonitrile Butadiene Styrene (ABS) and Nitrile Butadiene Latex (NBL), which have a large global market share, has narrowed. However, with the removal of opportunity costs from regular maintenance in the previous quarter and strong performance in caustic soda, an operating profit margin of over 10% is expected, showing overwhelmingly better results compared to competitors.

The advanced materials division's operating profit is expected to improve significantly to 87.6 billion KRW compared to the previous quarter.

LG Chem is expanding POE production capacity to respond to the solar power market. They plan to secure a total POE production capacity of 380,000 tons (world's 2nd largest) from 2023 to 2024 by adding an additional 100,000 tons.

Researcher Lee Dongwook of Kiwoom Securities analyzed, "Considering the recent price and profitability of POE, LG Chem is expected to record an operating profit of over 300 billion KRW annually from the POE segment alone," adding, "It is judged that LG Chem continues to deliver differentiated performance compared to competitors."

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