NH Investment & Securities said on the 6th that LX International is poised to be the biggest beneficiary of expanding coal demand as the importance of energy security grows amid the Middle East war. It maintained a Buy rating and raised the target price to 65,000 won from 42,000 won. LX International closed the previous session at 53,100 won.
Lee Sang-heon, an analyst at NH Investment & Securities, said, "As the Middle East war triggers an energy crisis, liquefied natural gas (LNG) prices have surged and supplies have become unstable, prompting many countries to again increase the share of coal-fired power to curb electricity costs and secure energy security," and added, "As coal demand expands, coal prices are rising, and earnings improvement is expected to accelerate."
Japan is keeping the utilization rate of coal-fired power at a high level and has temporarily allowed the operation of older coal-fired plants. In China, not only did new coal power additions last year hit a 10-year record high, but proposals for new and restarted coal-fired power projects also reached an all-time high of 161 gigawatts (GW).
Thailand also ordered coal-fired power plants to run at maximum output, and Bangladesh likewise greatly increased the share of coal power. The Philippines plans to temporarily increase coal-fired generation and is considering boosting coal imports from Indonesia, its main supplier.
Korea is also expected to extend the shutdown timing of Boryeong Power Unit 5 and Hadong Power Unit 1 until March next year, and Taean Power Unit 2 is likewise expected to be included in the review.
In addition, it is a positive sign that Terra Energy Center, a U.S. energy company, plans to invest $1 billion in a coal-fired power plant construction project underway in Alaska.
NH Investment & Securities forecast LX International's first-quarter revenue at 4.1835 trillion won and operating profit at 105.3 billion won. It projected that revenue rose 3.3% from a year earlier while operating profit fell 9.9%, but would beat market expectations.
The analyst said, "In the resources and trading/new growth divisions, a turnaround in earnings is expected on higher coal prices," and added, "In the second quarter as well, with coal prices continuing to rise and the increase in the container freight index being reflected, an earnings turnaround should be possible."