[Click eStock] "LS, Investment Inaugural Year... Growth Value Highlighted Next Year"

IBK Investment & Securities Report

IBK Investment & Securities evaluated LS as having temporarily slowed profitability but highlighted its growth value. Accordingly, it maintained a 'Buy' investment rating and announced on the 25th that it raised the target price from 100,000 KRW to 110,000 KRW.

Kim Jang-won, a researcher at IBK Investment & Securities, stated, "Due to the change of LS MnM from an equity-method affiliate to a consolidated subsidiary, LS's consolidated sales and operating profit significantly increased compared to the same period last year. However, net profit did not reflect this effect as LS MnM recorded losses related to foreign exchange and derivatives costs."

Researcher Kim explained, "LS MnM performed exceptionally well last year. Therefore, we initially expected this year's annual operating profit to be about 15% lower than last year, but after the first-quarter earnings announcement, we revised it to be 34% lower."

He added, "One of the reasons for the first-quarter earnings slump was the regular maintenance of the plant, which is a one-time event and not of great significance. However, the sulfuric acid business, which generated about 100 billion KRW in operating profit last year, is expected to return all last year's profits unless there is a significant change in market conditions. Additionally, the weak price of palladium was another reason for the profit adjustment."

He continued, "Although the smelting fee increased by 35% compared to last year and plant operations have normalized, leading to improved earnings in the second quarter, the outlook for LS MnM this year should be lowered. However, other affiliates are expected to continue their strong performance."

He concluded, "Although LS MnM's performance fell short of expectations, there is no objection to this year being the first year of investment and the growth value being highlighted next year. We maintain the Buy rating and raised the target price by 10% due to adjustments in the discount rate."