[Click eStock] "LG Chem's Profitability Weakness to Continue... Investment Rating Downgraded"

On the 23rd, Kiwoom Securities downgraded LG Chem's investment rating from 'Outperform' to 'Market Perform' and lowered the target price from 500,000 KRW to 383,000 KRW, stating, "This year, the relative weakness in European electric vehicle sales growth and the decline in lithium metal prices may cause stagnation in operating profit growth. This is interpreted as a period where capital expenditure (CAPEX) burdens increase more than profitability."

On the same day, Jeong Kyung-hee, a researcher at Kiwoom Securities, said, "LG Energy Solution's preliminary first-quarter results showed a 75% decrease year-on-year to 157.3 billion KRW. We estimate LG Chem's first-quarter operating profit to be about 117 billion KRW, which is a poor performance, down 85% compared to the same period last year."

The advanced materials segment is expected to see a profit decrease of about 34 billion KRW (operating margin 4.0%) due to the weakness in lithium prices, and despite the rise in naphtha prices in the petrochemical sector in the first quarter due to increased oil prices, it appears to have continued operating losses due to profitability declines across most product lines.

On a consolidated basis, operating profit is estimated to have decreased by 38% year-on-year to about 1.6 trillion KRW. Researcher Jeong noted, "This is about 46% below the market consensus of 2.9 trillion KRW," adding, "The petrochemical sector is expected to experience continued weak market conditions until next year," and "Especially in the first half of the year, the average selling price is expected to decline further due to the lagging effect of the drop in lithium metal prices."