[Click eStock] "LG Chem H2 Earnings Improvement Expected... Target Price Maintained"

[Asia Economy Reporter Lee Myunghwan] Shinhan Financial Investment announced on the 11th that it expects LG Chem's performance to improve in the second half of the year, maintaining a buy rating and a target price of 750,000 KRW.

Shinhan Financial Investment forecasts the company's operating profit to increase by about 25% compared to the previous quarter to 932 billion KRW, in line with the market consensus of 862 billion KRW. The petrochemical division's operating profit is expected to decrease by 13% from the previous quarter to 598.4 billion KRW, due to increased cost burdens from rising oil prices and weak demand in China. The advanced materials segment is projected to record an operating profit of 82.6 billion KRW (operating margin 6.1%), reflecting increased shipments of cathode materials and higher average selling prices (ASP). The performance of the separator business is also expected to contribute to strong results.

The operating profit for the second quarter is expected to decrease by 17% from the first quarter to 774.6 billion KRW. The petrochemical operating profit for Q2 is forecasted to decline by 19% from the previous quarter to 482.5 billion KRW due to rising naphtha prices. The advanced materials and battery segments are also expected to see slight declines compared to the previous quarter.

However, operating profit in the second half is expected to improve compared to the first half due to better performance in key business units. The chemical industry is anticipated to gradually improve with the recovery of demand in China and the stabilization of oil prices at lower levels in the second half. Recovery is also expected in previously weak product lines such as NBL, ABS, and PO. The advanced materials segment is projected to expand its contribution to profits through growth in cathode material shipments and improved profitability. With cathode material capacity expansion and separators, the contribution of advanced materials to performance is expected to increase, and electric vehicle sales in the second half are also anticipated to recover.

Researcher Lee Jinmyung of Shinhan Financial Investment said, "With high value-added products leading the way, LG Chem is expected to deliver differentiated performance in the second half with higher competitiveness compared to other chemical companies," adding, "The stock price revaluation is expected to continue along with improvements in core and growth business performance in the second half."