iM Securities diagnosed that it is difficult to find room for a rebound in stock prices for LG CHEM. It lowered the target price from the previous 470,000 won to 320,000 won. However, the investment opinion remains as 'buy.' On the 3rd, LG CHEM's closing price was 222,000 won.
On the 4th, Jeon Yoo-jin, a researcher at iM Securities, explained, "I have changed the earnings estimates for LG CHEM this year amid the uncertainties in the global electric vehicle (EV) market centered around the United States and the prolonged downturn in the petrochemical industry."
At this point, it is the judgment of the former researcher that finding upward momentum for LG CHEM's stock price is difficult. This is due to the significant increase in policy uncertainties regarding electric vehicle subsidies and the reduction or abolition of the Advanced Manufacturing Production Credit (AMPC) as Donald Trump, the U.S. President, regains power.
The former researcher said, "While it is clear that the petrochemical market has gone through a down cycle, the supply-demand balance remains a burden to expect remarkable growth." LG CHEM must seek momentum for a rebound domestically rather than externally.
At this time, it is expected that streamlining naphtha cracking facilities (NCC) and raising funds through the sale of equity in LG Energy Solution could play a role. The former researcher stated, "It's just a matter of speed and timing, but this remains a valid scenario," and said, "From a medium- to long-term perspective, the investment opinion on LG CHEM remains a buy."
In the fourth quarter of last year, LG CHEM recorded an operating loss of 252 billion won. The net loss for the period was 899.2 billion won. The former researcher said, "Despite the AMPC subsidies being normally reflected for production volumes in the U.S., the large loss for LG Energy Solution well demonstrates how weak the fundamentals and sentiment are in the North American electric vehicle market."
The LG Energy Solution and cathode materials division have served as cash cows for LG CHEM, driving external growth while compensating for the weaknesses in its petrochemical segment over the past three years. However, the situation is expected to change with U.S. President Trump's unfavorable stance towards electric vehicles.
President Trump signed an executive order to abolish the EV mandate and state-level emission regulations. He is also holding firm on the repeal of the Inflation Reduction Act (IRA). The former researcher noted, "This year, the battery and cathode materials divisions will continue to face uncertainty and will not be able to fill the gaps left by the petrochemical downturn."