[Click eStock] "LG Hwakhwa, Profit Rebound Valid Next Year"

Target Price Revised Downward by 14% Compared to Previous Level

On the 18th, NH Investment & Securities downgraded the target price of LG Chem from 440,000 KRW to 380,000 KRW, reflecting a slowdown in upstream demand. The investment rating was maintained at 'Buy.'

Choi Young-kwang, a researcher at NH Investment & Securities, stated, "Considering that the operating profit rebound next year remains valid and the current stock price is trading at a historically low price-to-book ratio (PBR), we maintain the investment rating. However, the target price is lowered by 14% compared to the previous one due to the slowdown in upstream demand, uncertainties in the U.S. electric vehicle subsidy policy, downward revisions in LG Energy Solution's earnings forecasts and target multiples, and the consequent upward revision of net debt estimates."

LG Chem's fourth-quarter earnings this year are expected to fall short of market expectations. Researcher Choi said, "With an operating loss of 149.8 billion KRW in Q4, turning to a deficit compared to the previous quarter, it will fall short of the consensus operating profit estimate of 60.1 billion KRW. Due to inventory adjustments by upstream customers, the advanced materials division and LG Energy Solution are expected to record operating profits of 84.7 billion KRW, down 43.5% from the previous quarter, and an operating loss of 154.5 billion KRW, respectively." He added that cathode materials are expected to see sales volume and prices fall by 30% and 10% respectively compared to the previous quarter, resulting in an operating profit margin of 0.5%, while the petrochemical division is forecasted to record an operating loss of 19.4 billion KRW due to continued weak spreads.

There is an expectation of performance improvement next year. Researcher Choi said, "Despite the prolonged petrochemical downturn, LG Chem is expected to improve its performance next year based on a diversified business portfolio, including the expansion of cathode material production capacity and the recovery of its subsidiary LG Energy Solution's earnings."

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