LG Chem Focused Solely on Growth, Stock Price Eyes 800,000 Won Milestone

Stable Performance Recorded in Q2... Securities Firms Simultaneously Raise Target Prices

Photo by Asia Economy DB

[Asia Economy Reporter Kum Boryeong] As LG Chem showed stable performance in the second quarter of this year and is expected to have growth potential in its battery business in the second half, securities firms' target stock prices soared to 800,000 KRW.

According to LG Chem on the 3rd, consolidated operating profit in the second quarter recorded 571.642 billion KRW, a 131.5% increase compared to the previous year, showing an earnings surprise that greatly exceeded consensus. Sales increased by 2.3% to 6.935191 trillion KRW.

Petrochemicals and batteries led the strong performance. In the petrochemical sector, due to low oil prices caused by the COVID-19 pandemic, the price of naphtha, a raw material, fell simultaneously, giving domestic naphtha facilities a competitive advantage over US ethane gas-based facilities. Among major products, ABS (plastics for home appliances and automobiles) contributed to performance improvement thanks to the recovery in demand for home appliances.

Ji-yeon Lee, a researcher at Shin Young Securities, analyzed, "It will be difficult to completely escape the impact of COVID-19 for the time being, but the cost reduction effect due to the low oil price trend is expected to continue," adding, "A portfolio focused on high value-added products will enable stable performance compared to competitors."

The battery sector is expected to show even higher expectations in the second half. With the stabilization of yield at the Poland plant, there is a high possibility of realizing higher profits. Although electric vehicle demand is increasing faster than expected, the limited number of battery suppliers is also one of the attractive points. Seung-jae Han, a researcher at DB Financial Investment, explained, "We expect battery operating profit in the third quarter to be 218.7 billion KRW, and anticipate continued surprises thanks to the traditional peak season effect of small batteries and significant growth in automobile battery sales."

The stock price is also smiling broadly. The stock price, which was 530,000 KRW on the 30th of last month, rose 7.17% (38,000 KRW) to 568,000 KRW on the 31st compared to the previous trading day. As of 9:50 a.m. on the same day, LG Chem's stock price was 620,000 KRW, up 9.15% (52,000 KRW) from the previous close. During the session, it soared to 636,000 KRW, marking a 52-week high. Its market capitalization ranking also jumped one notch to 5th place.

Securities firms have unanimously raised LG Chem's target stock price. Hana Financial Investment raised the target price from the previous 630,000 KRW to 800,000 KRW. Hyundai Motor Securities adjusted it upward from 610,000 KRW to 780,000 KRW, Mirae Asset Daewoo from 650,000 KRW to 780,000 KRW, and Hi Investment & Securities from 650,000 KRW to 750,000 KRW.