[Click eStock] "LX Inter, Earnings Expected to Fall Short... Impact of Sharp Freight Rate Drop"

[Asia Economy Reporter Hwang Yoon-joo] NH Investment & Securities forecasted on the 22nd that LX International's fourth-quarter earnings would fall short of consensus. The investment opinion 'Buy' and the target price of 60,000 KRW were maintained.

Dongyang Kim, a researcher at NH Investment & Securities, stated, "LX International's fourth-quarter sales are expected to increase by 6% year-on-year to 4.8035 trillion KRW, while operating profit is expected to decrease by 4% to 199.1 billion KRW, falling short of market consensus."

Researcher Kim pointed out, "In logistics, despite fixed-price contracts with affiliates, a decline in freight rates inevitably leads to weaker operating profits." He also explained, "Trading and new growth, which include resource and coal trading, are expected to weaken compared to the previous quarter due to coal price adjustments and shipment delays of Indonesian and Australian coal caused by increased rainfall."

Logistics freight weakness is expected to continue into the first quarter of next year. However, profit resilience is anticipated due to the full reflection of consolidated earnings from Poseung Green Power and Korea Glass Industry.

Researcher Kim predicted, "Despite negative factors such as the application of progressive tax rates on Indonesian coal and adjustments from peak exchange rates, operating profit for 2023 is expected to decrease by 27% year-on-year to 739 billion KRW through increased coal production in Indonesia and China (from 15.8 million tons to 20 million tons) and the consolidation of Korea Glass Industry and Poseung Green Power earnings (approximately 50 billion KRW)."

He added, "The company is progressing with the transition to 'Eco-friendly & Wellness' businesses, including a 20% equity investment in an eco-friendly plastic (PBAT) production company (scheduled to start production in 2024), potential acquisition of nickel mines and refineries, and expansion of the carbon emission rights business."