LX Hausys Draws Attention for Its 'B2C and Automotive Materials' Businesses; Target Price Set at KRW 50,000

[Financial News] Hyundai Motor Securities maintained its target price of KRW 50,000 and Buy rating for LX Hausys, forecasting that the company will sustain its earnings recovery through the expansion of its B2C business and increased sales in non-building-materials segments such as automotive materials and industrial films. Based on the closing price of KRW 33,400 on the 17th, the upside to the target price is 49.7%.
Donghyun Shin, an analyst at Hyundai Motor Securities, said, "LX Hausys' building-materials business is recovering on increased housing transaction volumes, while its non-building-materials segment is defending overall earnings by securing stable overseas sales."
LX Hausys' building-materials revenue rose sharply in the second quarter as housing transaction volumes increased year over year despite the strengthening of housing-related regulations.
Operating profit also increased significantly as the temporary benefit from a United States tariff refund was reflected. Second-quarter revenue was estimated at KRW 940 billion, up 14.7% year over year, while operating profit was estimated at KRW 55 billion, an increase of 329.0%. Building-materials revenue rose 19.8% to KRW 656 billion.
However, Hyundai Motor Securities offered a cautious outlook for the housing market in the second half of the year. It judged that optimism about housing transaction volumes would be difficult amid base-rate hikes and rising mortgage rates in July and August. There were also concerns that higher material and freight costs resulting from the United States-IRAN war could increase cost pressures in the second half.
Hyundai Motor Securities expects these pressures to be offset by solid overseas sales of automotive materials and industrial films, along with the expansion of the B2C business. Its analysis found that LX Hausys is reducing the building-materials business's exposure to construction-industry conditions by increasing the share of B2C operations, limiting the possibility of a structural decline in revenue. It also noted the company's efforts to strengthen its B2C sales and distribution capabilities and expand its high-value-added product portfolio.
The earnings forecast was also raised. Hyundai Motor Securities expects LX Hausys to post revenue of KRW 3.374 trillion and operating profit of KRW 135 billion this year. Compared with its previous forecast, the new estimates are 4.1% higher for revenue and 16.7% higher for operating profit. The net profit forecast was also raised 38.8% to KRW 96 billion.
Shin maintained the Buy rating, citing a slow but gradual recovery in industry conditions and earnings, as well as the possibility of resumed dividend payments following a return to profitability.

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