[Click eStock] LG Chem Targets 1 Trillion KRW Battery Operating Profit... Target Price Up 21%

[Asia Economy Reporter Lee Seon-ae] Daishin Securities announced on the 28th that it is raising the target price for LG Chem by 21%, from the previous 1.2 million KRW to 1.45 million KRW, due to expectations of increased operating profit.

The target price was calculated using the SOTPs (Sum of the Parts) method and corresponds to a 44x 12-month forward price-to-earnings ratio (PER).

Researcher Han Sang-won of Daishin Securities explained, "The target price increase is due to the battery division's value rising by approximately 15 trillion KRW compared to before, with earnings estimates revised upward (2021F OP +12%), and reflecting the valuation increase of China's CATL from 29x to 35x. It is time to focus on the battery business value re-evaluation following LG Energy Solution's planned IPO."

Operating profit for the fourth quarter is expected to record 673.6 billion KRW, a 25.3% decrease from the previous quarter, slightly below market expectations (726.9 billion KRW) and our estimates (698 billion KRW).

The profit decline compared to the previous quarter was already anticipated due to opportunity losses caused by the Yeosu NCC operation disruption and provisions for ESS/EVB fire accidents. However, one-time losses (estimated to slightly exceed 100 billion KRW each) are expected to be reflected more significantly than anticipated, leading to a slight shortfall against market expectations.

Daishin Securities has set LG Chem's sales guidance for this year at 37.3 trillion KRW (+24% year-on-year), with petrochemicals at 14.8 trillion KRW and batteries at 18.9 trillion KRW, aiming for 1 trillion KRW operating profit in the battery business.