[Click eStock] "LG Chem, 2023 as the First Year of Corporate Value Reassessment... Target Price Up"

[Asia Economy Reporter Kwon Jaehee] Hana Securities on the 23rd upgraded its investment opinion on LG Chem to 'Buy' and raised the target price to 850,000 KRW.

For LG Chem, 2023 is expected to be the first year of corporate value reassessment. The largest cathode material plant in the United States, starting at 30,000 tons in 2025 and expected to reach a final capacity of 120,000 tons by 2027, is anticipated to be the signal fire for this. The unit investment amount for this cathode material expansion (approximately 3.5 trillion KRW per 10,000 tons) has significantly increased due to factors such as inflation. Regarding this, Yoon Jaesung, a researcher at Hana Securities, stated, "This can be interpreted as raising the entry barrier for U.S. expansion in terms of financing," and added, "It is a factor that awards high marks to LG Chem's financial strength and execution capability."

The future reassessment of LG Chem's cathode material valuation depends on whether it can maintain overwhelmingly superior profit margins compared to competitors. If the secret to significantly higher profit margins compared to competitors in 2021-2022 was a high precursor self-sufficiency rate and metal sourcing advantage, efforts to achieve this will be crucial going forward. By 2027, the precursor self-sufficiency rates are expected to drop sharply from the current 18% and 57% to 8% for LG Energy Solution and 21% for LG Chem, respectively. With the recent U.S. expansion announcement, the cathode material internalization rate is expected to approach 40% by 2027, reaching a certain level of the group's target standard. Therefore, additional investment in precursor and metal sourcing internalization is inevitable. In this regard, the possibility of additional joint ventures (JVs) with domestic companies related not only to precursors but also to nickel and lithium is increasing.

Researcher Yoon analyzed, "To achieve a value reassessment of LG Chem next year, resolving uncertainties in facility investment financing for the materials business, including the possibility of partial sale of LG Energy Solution shares, will be the strongest trigger."

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