[Click eStock] "LG Chem, Major Product Raw Material Costs Drop... Price Competitiveness Up"

[Asia Economy Reporter Ji-hwan Park] Kiwoom Securities on the 4th presented a 'Buy' investment rating and a target price of 500,000 KRW for LG Chem, citing expected margin improvements for key products due to the recent sharp decline in raw material prices.

Researcher Dong-wook Lee of Kiwoom Securities analyzed, "LG Chem shows a pattern of improved profitability when prices of butadiene and benzene in the petrochemical product mix fall," adding, "Margin improvements are expected for styrene-based polymers, rubber, and phenol derivatives due to the recent sharp drop in raw material prices."

Additionally, the recent strong prices of propylene are expected to support a solid trend in the average selling price (ASP) of the acrylic and SAP divisions.

The Yeosu cracker expansion, which is underway to avoid volatility in monomer prices, is expected to be completed by next year.

Researcher Dong-woon Lee explained, "This cracker expansion is expected to increase the self-sufficiency rate of base oils," adding, "Ethylene and propylene will achieve full self-sufficiency, and dependence on external purchases of butadiene and benzene is expected to decrease." He further noted that through this, Yeosu's ethylene production capacity will increase to 2.1 million tons, anticipating economies of scale and additional improvements in energy consumption efficiency.