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Photo courtesy of Yonhap News |
[Alpha Biz= Paul Lee] NH Investment & Securities has lowered its target price for LG Chem to KRW 420,000, down 6.7%, reflecting deteriorating profitability in its petrochemical business. However, the firm maintained its “Buy” rating, citing a potential turnaround in cathode materials.
In a report on March 27, analyst Choi Young-kwang noted that “chemical product spreads have sharply declined following the outbreak of war,” adding that demand has weakened amid rising prices and that higher raw material costs have not been fully passed on to product prices.
The brokerage expects LG Chem to post an operating loss of KRW 55 billion in the first quarter, exceeding market consensus, with losses widening to KRW 187.6 billion in the second quarter. Profitability in the petrochemical segment is projected to deteriorate significantly due to lower utilization rates and rising naphtha costs being reflected in production expenses.
On the other hand, Choi assessed that downside risk in the cathode materials business is limited, as utilization rates are already in the low teens.
“We are seeing signs of a rebound in cathode material shipments and rising selling prices, suggesting that profitability in the advanced materials division will improve in a ‘low-first, high-later’ trajectory,” he said.
He added that LG Chem’s stake in LG Energy Solution will act as a downside support factor for the stock, as it can be utilized over the mid-to-long term for financial structure improvements and enhanced shareholder returns.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
