LG Chem Brimming with Positive Factors... 2Q Operating Profit Expected at 416.4 Billion KRW, Up 56% YoY

Both Chemical and Battery Sectors Sailing Smoothly... Strong Growth in European EV Policies and Tesla Sales

[Asia Economy Reporter Minwoo Lee] LG Chem is expected to achieve solid results in the second quarter of this year due to growth in its chemical and battery sectors. Analysts note favorable factors such as the rapid growth in electric vehicle sales in Europe and increased battery sales to Tesla.

On the 27th, DB Financial Investment forecasted that LG Chem would record consolidated sales of 7.339 trillion KRW and an operating profit of 416.4 billion KRW in the second quarter of this year. This represents a 2.5% increase in sales and a 55.6% increase in operating profit compared to the same period last year. The operating profit also significantly exceeded the market consensus estimate of 341.8 billion KRW. The main drivers of this strong performance are identified as the chemical and battery sectors. Seungjae Han, a researcher at DB Financial Investment, explained, "The chemical sector's profitability expanded due to the use of low-cost raw materials and a focus on high-value downstream products," adding, "The battery sector's sales growth exceeded initial expectations due to a surge in cylindrical battery sales and an increase in shipments of medium and large batteries."

Positive factors are expected to continue for the foreseeable future. Due to the expansion of electric vehicle subsidies in Europe, the rapid growth in European electric vehicle sales is expected to accelerate in the second half of the year. With yield improvements underway, the profitability of medium and large batteries is expected to improve as sales volumes expand significantly in the second half, benefiting from economies of scale. Cylindrical battery production capacity has also more than doubled from 14 gigawatt-hours (GWh) last year to 25 GWh this year, and sales to Tesla have been increasing significantly since the second quarter. Analysts suggest that if Tesla expands its sales regions and sales volumes increase, the performance of small batteries could surpass market expectations.

Against this backdrop, DB Financial Investment has issued a 'Buy' rating for LG Chem and raised the target stock price to 600,000 KRW. The closing price on the previous day was 501,000 KRW. Researcher Han stated, "LG Chem's position is inevitably strengthened as the world's top electric vehicle battery producer with stable battery performance confirmed by multiple customers," and added, "Considering the various positive factors, LG Chem's battery business environment and competitiveness are expected to continue an upward trend and may even exceed the already heightened expectations."