LS Securities analyzed on the 9th that LG CHEM is expected to see the value of its equity in LG Energy Solution become visible. Consequently, it upgraded its investment opinion from 'neutral (Hold)' to 'buy' and raised the target stock price to 308,000 won. The closing price for LG CHEM on the previous trading day was 254,500 won.
LG CHEM's second-quarter revenue is predicted to be 10.8356 trillion won, a decrease of 11.9% compared to the same period last year, and the operating profit is expected to be 360.8 billion won, a reduction of 11.1% compared to the same period last year.
Jeong Kyung-hee, a researcher at LS Securities, said, "The operating profit is at a level 10.1% higher than the previous estimate." She noted that, by sector, the increase in operating profit for LG Energy Solution, mainly driven by the Advanced Manufacturing Production Tax Credit (AMPC), is expected to offset declines in other sectors.
However, she pointed out that the weak revenue and operating profit from advanced materials (cathode materials) and petrochemicals, which account for a significant portion of LG CHEM's own business, are areas to watch.
LS Securities judged that the fundamental weakening of LG CHEM’s main business sectors, including advanced materials (cathode materials) and petrochemicals, will continue. Nonetheless, it expects the value of equity in LG Energy Solution to become visible, proposing a buy investment opinion based on a valuation revision.
Researcher Jeong noted, "Given the capital expenditure (CAPEX) plan of approximately 2.82 trillion won this year, considering the issues of existing shareholder value dilution emphasized by the new government, and the recent stock market policy changes resulting from bipartisan agreements on the Commercial Act revision, the likelihood of partial equity sales in the medium term has increased." She explained that she assumed the initially sellable equity to be 11.8% when calculating the target stock price.