LG Chem, Target Price Cut to 350,000 Won Despite "Recovery in Advanced Materials and Batteries"

[Financial News] NH Investment & Securities lowered its target price for LG Chem from 400,000 won to 350,000 won, a 12.5% cut, forecasting that the company's earnings recovery will be slower than expected as weakness in the petrochemical industry persists.
LG Chem's closing price in the previous trading session was 252,500 won. This implies 38.6% upside to the 350,000-won target price. However, NH Investment & Securities maintained its "Buy" rating, saying that the company's earnings growth outlook through its advanced materials business and battery subsidiary remains intact.
On the 28th, NH Investment & Securities analyst Choi Young-kwang projected, "Although the downturn in LG Chem's petrochemical business is continuing, its earnings recovery is expected to continue, led by the advanced materials division and battery subsidiary LG Energy Solution."
In particular, he forecast that profitability in the advanced materials division would gradually improve as cathode material shipments to new customers gain momentum in 2027.
LG Chem's third-quarter results are expected to fall below market expectations. Revenue was estimated at 15.157 trillion won, up 47.9% from a year earlier, while operating profit was projected at 9.9 billion won. This is significantly below the 187 billion won operating profit consensus.
Weakness in the petrochemical division is expected to weigh on earnings. The division's third-quarter operating loss was estimated at 225.1 billion won. Spreads continued to decline as one-off gains from the lagging effect and tariff refunds recorded in the previous quarter disappeared.
By contrast, the advanced materials division is expected to recover. Third-quarter operating profit was projected at 24.4 billion won, with an operating margin of 2.1%, representing a slight improvement from the previous quarter.
Cathode material prices are expected to remain at a level similar to the previous quarter, while shipments should increase on higher sales volumes. In 2027, the ramp-up in cathode material shipments to new customers is expected to support a recovery in profitability in the advanced materials business.
NH Investment & Securities identified advanced materials and batteries as LG Chem's mid- to long-term growth drivers. Although a recovery in the petrochemical industry may be slow, the company judged that the overall earnings recovery outlook would remain intact, supported by improving results in advanced materials businesses such as electronic materials and cathode materials, along with growth at LG Energy Solution.
The target price cut reflects the possibility that the benefits from growth in the energy storage system (ESS) market may be more limited than expected amid limited growth in the electric vehicle (EV) market, as well as the potential for a prolonged downturn in the petrochemical industry. To reflect these factors, NH Investment & Securities lowered the target multiple for the advanced materials division from 9.4 times to 7.2 times.

[email protected] Choi Young-kwang Reporter