[Click eStock] "LG Chem, $1.5 Trillion US Battery Subsidy... Target Price Up"

Yuanta Securities raised the target price for LG Chem from 780,000 KRW to 900,000 KRW on the 18th.

LG Chem is expected to have recorded sales of 14.1 trillion KRW and an operating profit of 675.3 billion KRW in the first quarter of this year. The operating profit increased by 253% compared to the previous quarter but decreased by 34% compared to the same period last year. While solid performance was recorded in the advanced materials and battery sectors, the basic materials sector continued to incur losses.

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ABS, LG Chem's main chemical product used for IT exterior materials, is expected to continue its downward cycle until 2024. This is due to large-scale capacity expansions in China, which will exacerbate oversupply. Global ABS demand is about 10 million tons, increasing by approximately 500,000 tons annually, while production is at 12.2 million tons, and about 3.64 million tons of new facilities are scheduled to be operational by 2024.

However, Yuanta Securities expects LG Chem to generate an additional profit of approximately 1.5 trillion KRW in 2024 from battery subsidies under the U.S. Inflation Reduction Act (IRA). The company's full-year expected performance for this year is sales of 56.8 trillion KRW and an operating profit of 2.7 trillion KRW.

Hwang Kyu-won, a researcher at Yuanta Securities, explained the reason for the target price increase, stating, "Although the growth momentum in earnings is stagnating due to pressure from petrochemical sector expansions and declining profit margins in cathode materials, the profit effect from U.S. subsidies in the battery sector has been reflected."

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