The Butterfly Effect of Multiple Homeowner Regulations? LX Hausys Sees Surging Q1 Profit [Click eStock Column]

1Q Operating Profit Soars 549% Year-on-Year
Benefit from Last-Minute Surge in Housing Transactions
Profit Expected to Grow This Year, but High-to-Low Trend Forecast

LX Hausys posted a 'surprise performance' in the first quarter of this year. The company saw a recovery in volume as housing transactions increased ahead of the end of the capital gains tax exemption for multiple homeowners. This was further aided by favorable foreign exchange effects.

On May 5, Mirae Asset Securities raised its target price for LX Hausys by 39.4% to 46,000 won and upgraded its investment rating from 'Neutral' to 'Buy.' The previous day's closing price was 42,600 won.

This was attributed to the company's better-than-expected results in the first quarter. On a consolidated basis, sales increased by 4.3% year-on-year to 814.7 billion won, while operating profit soared by 549.7% to 45.9 billion won.

The recovery in B2C volume was attributed to a 22% year-on-year increase in housing transactions in the first quarter, ahead of the end of the capital gains tax exemption for multiple homeowners on May 9. In addition, the use of raw materials purchased at lower prices before the outbreak of war between the United States and Iran, as well as improved exports such as deco films due to the strong won-dollar exchange rate, contributed to the results.

Mirae Asset Securities estimated LX Hausys' consolidated operating profit for this year at 107 billion won, up 723% from the previous year. However, the company predicted that annual profit would show a high-to-low trajectory throughout the year, considering increases in key chemical raw material and logistics costs such as polyvinyl chloride (PVC) and methyl methacrylate (MMA) due to the Iran situation. In particular, the recovery of B2B business was also forecast conservatively, given the slowdown in new supply.

Kim Giryong, a researcher at Mirae Asset Securities, said, "The key variable for profit margins will be whether the recovery in housing transactions continues and whether the company can pass on increases in oil and chemical raw material prices to sales prices."

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