[THE INVESTOR] LG Chem’s earnings will be dented by routine maintenance of naphtha cracking centers but its battery sector is picking up fast, said Kiwoom Securities on Nov. 23 maintaining a “buy” recommendation and 480,000 won (US$425.12) target price.
It is conducting maintenance at two NCC plants until the first quarter next year, and the dip in supply and incurring costs will bring down its bottom line below market expectations. The operations of the plants will improve after maintenance with capacity expansion. Meanwhile its battery unit will improve as it has preemptively linked approximately 70 percent of remaining order for EV batteries to the price of metals. It has also increased manufacturing capacity of cathode materials and internalized it up to 30 percent, planning to triple the capacity and raise internalization rate to 50 percent by 2020, said analyst Lee Dong-wook.
As of end-September, its materials division assets are still larger than that of battery sector, but the latter has shown much higher growth, at around 18.2 percent growth in the past eight years. Considering its heavy investments, its battery sector could top the materials arm as early as 2022, forecast the analyst.
By Hwang You-mee (firstname.lastname@example.org)