[Click eStock] "LG Chem 1Q Earnings Expected to Significantly Exceed Market Expectations"

Profitability Improves Across Both Petrochemicals and Advanced Materials Divisions

LG Chem's first-quarter earnings this year are expected to significantly exceed market forecasts, turning profitable compared to the previous quarter, according to an analysis. The rapid fluctuations in the industry have been limited, and profitability improvements are anticipated across several business divisions.

On the 19th, IBK Investment & Securities maintained its 'Buy' rating and target price of 320,000 KRW for LG Chem based on this background. The closing price the previous day was 231,500 KRW.

IBK Investment & Securities projected LG Chem's operating profit for the first quarter of this year to be 191 billion KRW, more than three times the market consensus of 61.5 billion KRW. The main reason is the performance improvement in the core business divisions.

Firstly, in the petrochemical division, an operating loss of 73.7 billion KRW is expected, with the deficit narrowing compared to the previous quarter. Although rapid fluctuations in the industry were limited, this is due to the effects of restructuring on general-purpose products such as Styrene Monomer (SM), Ethylene Oxide (EO), and Ethylene Glycol (EG). However, high-value-added products such as automotive-grade Acrylonitrile Butadiene Styrene (ABS), Solution Styrene Butadiene Rubber (SSBR), semiconductor cleaning agents (Isopropyl Alcohol, IPA), acrylates, and Super Absorbent Polymers (SAP) are analyzed to maintain solid profitability.

The advanced materials division's operating profit is expected to increase by 161.4% from the previous quarter to 125.5 billion KRW. This is due to the elimination of one-time costs incurred in the previous quarter and a reduction in the metal price lagging effect (profit decrease due to time lag in raw material input). The operation rate of the cathode material plant has also been optimized, likely reducing fixed costs.

For PVC, sales expansion in India, the main export market, is expected in the second half of this year due to the implementation of BIS regulations. The reduction of general-purpose products and the expansion of high-value-added products such as electric vehicle charging cables are also expected to positively impact PVC profitability.

Accordingly, the net profit for this year is expected to increase by 114.7% from the previous year to 1.1055 trillion KRW. Lee Dong-wook, a researcher at IBK Investment & Securities, explained, "Despite increased interest expenses, operationally, performance improvement in the energy solutions segment is expected due to expanded ESS orders, increased Advanced Manufacturing Production Tax Credit (AMPC) from sales of the U.S. joint venture (JV), and limited additional price declines in batteries." He added, "Non-operationally, one-time costs such as impairment evaluations of separators and Aveo assets incurred last year are expected to be eliminated."