[Click eStock] "LG Sangsa, Earnings Improve Due to Rising Thermal Coal Prices"

[Asia Economy Reporter Ji Yeon-jin] Hana Financial Investment has raised the target price for LG Sangsa by 0.5% to 42,000 KRW, expecting the company’s 2nd quarter earnings to exceed market forecasts following improvements in the energy and palm oil sectors due to rising prices of thermal coal and palm oil, continuing the trend from the 1st quarter.

Yoo Jae-seon, a researcher at Hana Financial Investment, stated, "Although there is a possibility of some decline in logistics margins in the second half of the year due to increased bargaining power of shipping companies, growth compared to the previous year is expected to continue until cargo volume decreases. Based on the cash holdings, expectations for entry into new businesses in the future may be highlighted."

Operating profit for the 2nd quarter this year is forecasted to exceed expectations at 130.8 billion KRW, a 333.0% increase compared to the previous year. Sales are expected to improve by 75.1% year-on-year to 4 trillion KRW. It is analyzed that top-line growth and rising raw material prices will drive performance improvement. The energy and palm sectors are expected to turn profitable due to the rise in thermal coal and palm oil prices. In particular, thermal coal prices are showing levels significantly higher than the peak in 2018, raising expectations for performance from the 3rd quarter onward.

The Life Resources & Solutions segment is expected to turn profitable due to strong IT product trading, and logistics is estimated to maintain high margins with continuous cargo volume growth overall and increased installation logistics sales during the peak season for home appliance demand. The price of thermal coal for power generation continues to rise steadily due to strong bulk freight rates, rising oil prices, and increased coal demand during the power peak season. This creates an environment where profits from mines in Australia and Indonesia can be maximized.

Researcher Yoo said, "With the strengthening of ESG management, the coal business has been classified as a kind of declining industry, and there are negative impacts from a supply-demand perspective. However, since the price indicators continue to trend upward, profitability is improving, and the increased profitability can lower the difficulty of business restructuring, so there is sufficient room for revaluation."