[Click eStock] LG Chem, LG Energy Solution IPO as a Revaluation Opportunity

[Asia Economy Reporter Hwang Junho] Korea Investment & Securities lowered the target price of LG Chem to 970,000 KRW on the 19th.

First, the target price was lowered reflecting short-term earnings weakness and a decline in valuation of the petrochemical sector. Operating profit for Q4 last year is expected to be 986 billion KRW, down 27% quarter-on-quarter excluding one-time provisions. In the battery business, operating profit margin is expected to fall to 4% due to continued damage from the shortage of automotive semiconductors. What is particularly disappointing is the petrochemical sector. Operating profit is estimated to have decreased by 28% due to the decline in major product spreads combined with the impact of scheduled maintenance. The chemical business is also expected to see profit decline this year.

LG Chem's stock price has become more volatile ahead of the listing of LG Energy Solution. However, LG Chem's equity value is already reflected at more than 50% lower compared to competitors, so the LG Energy Solution listing can be seen as a revaluation opportunity due to uncertainty resolution. From this year, the investment momentum in the advanced materials business is also expected to accelerate.

Choi Go-woon, a researcher at Korea Investment & Securities, analyzed, "After the listing, LG Chem will be able to focus on battery materials investment and M&A based on not only 2.5 trillion KRW from existing shareholder sales but also annual EBITDA of around 5 trillion KRW." Going forward, the momentum of advanced materials is expected to diversify beyond cathode materials and separators."