[Click eStock] "LX International, Business Conditions Continue to Improve Due to Inflation and Won Depreciation"

Heungkuk Securities Report

[Asia Economy Reporter Minji Lee] Heungkuk Securities on the 8th issued a buy rating and a target price of 53,000 KRW for LX International. It is expected that all business sectors will show improved performance due to the strength of raw materials and the weakness of the Korean won.

Following the logistics boom in 2020 and improvements across all sectors including logistics, energy & palm, and trading last year, favorable business momentum continues this year due to strong commodity prices and a weak Korean won. LX International's business sectors consist of trading & new growth, logistics, and resources. As of the first quarter of this year, the sales proportions are trading (36.8%), logistics (57.8%), and resources (5.4%), respectively.

This year's annual sales are expected to reach 19.0483 trillion KRW, and operating profit 866.5 billion KRW, representing increases of 14.2% and 32% compared to the same period last year, respectively, suggesting operating profit growth exceeding the increase in scale.

The current favorable conditions in the general trading company sector are driven by inflation and the weak Korean won. Jongryeol Park, a researcher at Kiwoom Securities, said, "The current trend is expected to continue without breaking," adding, "Due to the prolonged war between Ukraine and Russia, the strength of various commodity prices including international oil prices continues, and logistics freight rates are not easily declining, so the current strong performance is likely to persist until the end of this year."

Researcher Park also stated, "Favorable performance momentum is expected to continue in the second quarter and the second half of the year," and "Despite the recent stock price rise, the stock price level is very undervalued (PER 3.9 times) compared to the performance momentum, and growth drivers are being added through new businesses along with the strong performance of existing businesses." However, it is predicted that the general trading company sector will weaken when global uncertainties prolong next year, leading to decreased trade volume due to demand slowdown and a reversal in raw material price declines.