Hana Securities on Apr. 1 said LX International is expected to benefit from rising commodity prices and logistics freight rates the longer the Middle East conflict drags on. It kept a "Buy" investment rating and raised the target price to 66,000 won from 46,000 won. The previous trading day's closing price of LX International was 45,250 won.
Yoo Jae-seon, an analyst at Hana Securities, said, "Commodity prices and logistics freight rates similar to those in 2022 are emerging," and "the longer the Middle East conflict lasts, the greater the room for improving earnings power could be."
LX International's first-quarter revenue this year is forecast at 4.2 trillion won, with operating profit at 102.5 billion won. Revenue fell 3.1% year over year, and operating profit declined 12.3%. The drop in operating profit was analyzed to be due to a base effect from weaker logistics freight rates compared with the same period a year earlier. However, with key performance indicators on a rebound trend, earnings growth is seen as possible from the second quarter.
Yoo said, "For resources, prices are favorable for thermal coal, palm, and nickel, and especially with the Middle East energy commodity supply-demand imbalance taking hold, coal prices are in a position to rise further," and "in the trading and new growth institutional sector, with cargo volumes holding up, trading revenue is expected to increase on the back of strength in methanol and thermal coal prices."
In logistics, freight rates have been rising sharply since the closure of the Strait of Hormuz, so margins are expected to improve from the second quarter with a time lag. For the equity-method affiliates, solid results are expected on the recovery of domestic coal prices in China and increased production, and revenue from the urea fertilizer plant could also expand.
Meanwhile, because thermal coal prices are in a rebound phase, Yoo emphasized the need for continued monitoring of energy supply issues stemming from the Middle East. Indonesia's low-calorific coal price hit a bottom of about $40 per ton in the third quarter of last year and had risen to $60 per ton as of March.
Yoo said, "If instability in the supply of Middle Eastern liquefied natural gas (LNG) persists, thermal coal prices have room to strengthen quickly as a substitute," and "absent issues with fuel costs related to mining equipment operation and fuel procurement, it is expected to act positively on the improvement of mine and thermal coal trading margins."