[Click e-Stock] "LG Chem, Sluggish Profitability Recovery... Target Price Lowered"

On September 28, NH Investment & Securities lowered its target price for LG Chem from 400,000 won to 350,000 won, citing the slow pace of profitability recovery. The investment opinion was maintained at 'Buy.'

Choi Youngkwang, a researcher at NH Investment & Securities, stated, "We have revised the target price downward by 12.5% compared to the previous estimate." He explained, "This is due to the limited benefits from the growth of the energy storage system (ESS) market, the prolonged weakness in electric vehicle (EV) demand, and a lowered outlook for cathode material profitability in 2027. In addition, taking into account the slower growth and sluggish profitability recovery compared to competitors, we lowered the target multiple for the advanced materials division from 9.4 times to 7.2 times."

LG Chem's third-quarter results this year are expected to fall short of market expectations. Researcher Choi said, "Third-quarter operating profit is projected to be 9.9 billion won, which will fall short of the consensus (the average of securities firms' forecasts). The petrochemical division is estimated to post an operating loss of 225.1 billion won. This large operating loss is attributed to the disappearance of one-off gains such as the positive lagging effect and tariff refunds seen in the previous quarter, combined with a further decline in spreads." For the advanced materials division, operating profit is forecast at 24.4 billion won, a slight improvement compared to the previous quarter. Researcher Choi analyzed, "The price of cathode materials remained the same as the previous quarter, but sales volume is estimated to have increased about twice compared to the previous quarter. However, the utilization rate is still estimated to be at a low level of 27%."

The advanced materials division and LG Energy Solution, a subsidiary, are expected to continue to drive earnings growth. Choi stated, "Despite the prolonged slump in the petrochemical market, earnings growth from the advanced materials division and the battery subsidiary will continue. The recovery of profitability for the advanced materials business remains valid, supported by the full-scale shipment of cathode materials to new customers in 2027."

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