[Click eStock] "LG Chem, Strong Mid-to-Long-Term Growth... Target Price Up"

[Asia Economy Reporter Kwon Jaehee] DB Financial Investment maintained its 'Buy' rating on LG Chem on the 1st and raised the target price to 830,000 KRW.

LG Chem's operating profit for the third quarter was 901.2 billion KRW, a 24% increase compared to the same period last year and exceeding the market consensus of 851.5 billion KRW. LG Energy Solution delivered a performance surprise due to simultaneous increases in selling prices, shipment volumes, and exchange rates, while Advanced Materials also exceeded estimates thanks to a rise in the average selling price (ASP) of cathode materials and increased shipment volumes. On the other hand, the Chemicals segment underperformed with 93 billion KRW due to sluggish market conditions and scheduled maintenance. The impact of segmental consolidated adjustments, which exceeded -200 billion KRW in the second quarter, also improved to around -130 billion KRW, which is positive.

Operating profit for the fourth quarter is expected to be 776 billion KRW. While petrochemicals continue to face weak market conditions, the impact of scheduled maintenance in Yeosu is expected to expand to 130 billion KRW, leading to a further decline compared to the previous quarter. However, with ongoing adjustments to ethylene operating rates in the region, a gradual rebound is expected from the fourth quarter as the bottom. Advanced Materials and Energy Solutions are expected to see the decline in metal prices gradually reflected in the ASP. Nevertheless, due to increased shipment volumes, quarterly performance is forecasted to be comparable to that of the third quarter.

Han Seungjae, a researcher at DB Financial Investment, said, "We raise the target price to 830,000 KRW reflecting the upward revision of profit estimates for Advanced Materials and the increase in LG Energy Solution's market capitalization," adding, "The profit scale of Advanced Materials has surpassed Chemicals, and mid- to long-term growth prospects are expected to remain solid, while Chemicals is expected to gradually rebound from the worst market conditions."

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