LG Chem: Gold Standard of Sustainable Business Model

LG Chem: Gold Standard of Sustainable Business Model

The creator is an analyst of NH Investment decision & Securities. He can be reached

The creator is an analyst of NH Investment decision & Securities. He can be reached at [email protected] — Ed.

We initiate protection on LG Chem at Invest in, with a TP of W690,000. By 2025, the business designs to make investments a overall of W10tn for improvement of eco-welcoming petrochemical solutions and battery supplies potential growth, aiming to protected organization model sustainability and development possible.

Check out concerns about keeping organization discounted and slowing petrochemical marketplace as already becoming reflected in share rate

 

We initiate coverage on LG Chem with a Purchase score and a TP of W690,000. As the mother nature and valuation numerous differs by company division, we use the SOTP system for our TP calculations. For its petrochemical area, contemplating that LG Chem offers a higher OPM versus rivals, we implement 4.7x, which signifies a 10% high quality to domestic peer typical EV/EBITDA. For LG Strength Answer (LG ES), we use 14.4x, CATL’s 2024F EV/EBITDA. For the significant-tech resources division, we implement 14.2x, a 50% lower price to the rechargeable battery peer average EV/EBITDA of 28.5x, having into account the simple fact that the contribution of the firm’s battery resources business to in general product sales is a lot less than 50%. Provided that LG Chem’s shares are buying and selling at a 2022E P/B of 1.3x, we check out fears more than both of those sluggish petrochemical company circumstances and reductions for LG ES as presently staying baked into LG Chem’s existing share value. We watch the critical to a future share selling price rebound as being an enhancement in petrochemical small business conditions and an working value expansion primarily based on a larger OPM at the firm’s battery materials business.

We forecast consolidated 2022 revenue of W50.4tn (+18.1% y-y), driven by bigger product price ranges and product sales expansion for the firm’s rechargeable battery area. But, OP will probably tumble 20.8% y-y to W4tn with an OPM of 7.9%, weighed upon by an OP plunge at the company’s petrochemical organization amid higher oil prices.

Interior growth momentum continues to be alive

Getting specified petrochem, battery components, and innovative drugs as new progress motorists, LG Chem ideas to spend W10tn by 2025 in these 3 business enterprise parts, aiming to make associated yearly gross sales of W12tn by 2026 and W30tn by 2030. We be expecting LG Chem’s inside development prospective to be solidified by using its aggressive portfolio diversification to include higher value-added petrochem products and solutions and investment decision in chemical recycling and biodegradable plastics.