[Click eStock] "LX Hausys, Possible Earnings Rebound This Year... Target Price Up 16%"

NH Investment & Securities maintained its 'Buy' rating on LX Hausys on the 1st, raising the target price by 16% from the previous 45,000 KRW to 52,000 KRW.

NH Investment & Securities forecasted a balanced improvement in performance across all business divisions of LX Hausys. As of the fourth week of May, the price of polyvinyl chloride (PVC) was $770 per ton, up 6% from the 2022 low, but still about 30% lower than the three-year average price from 2020 to 2022. Assuming the housing transaction volume in 2023 remains similar to the previous year at 500,000 units, a significant increase in B2C sales is unlikely; however, sufficient raw material price declines and eased inventory burdens are expected to improve profit margins. Accordingly, operating profit for the building materials division is projected to be 59.5 billion KRW this year.

The automotive parts and fabric business is expected to see sufficient margin improvement through the efficiency of tangible assets related to increased finished vehicle sales by Hyundai and Kia Motors. Additionally, the furniture and home appliance film business is anticipated to see sales improvements to LG Electronics in the second half of the year, supported by improved demand for home appliances. The materials and parts division is expected to return to profitability with an operating profit of 23.4 billion KRW this year.

Researcher Eun-sang Lee of NH Investment & Securities stated, “With the normalization of raw material purchasing costs and the full-scale profit improvement in the automotive parts and fabric business, a performance rebound is possible this year,” adding, “Therefore, we raise the target price by 16% from the previous level to 52,000 KRW.”