[Edaily Reporter Kwon Oh Seok ] iM Securities announced on the 3rd that it is maintaining its “Buy” investment rating and target price of 370,000 won for LGCHEM,LTD(051910)

Jeon Yu-jin, an analyst at iM Securities, stated, “While a decline in profits in the second half of the year compared to the first half is inevitable for the petrochemical sector due to the waning effect of low-cost naphtha inputs, the supply-demand balance for petrochemicals is expected to improve compared to pre-war levels due to damage to facilities and energy infrastructure caused by the prolonged armed conflict in the Middle East.” “For cathode materials, where shipments were very sluggish in the first half, shipments to new customers are expected to begin at the end of the third quarter, and volumes for ESS separators are also gradually increasing, so we anticipate a ‘strong first half, weak second half’ performance,” she analyzed.
Second-quarter operating profit reached 599.6 billion won, marking a return to profitability and exceeding the consensus estimate of 424.6 billion won by 41%. In particular, the petrochemicals division drove this positive surprise with 427.0 billion won in operating profit (+159% quarter-over-quarter). In the advanced materials sector, operating profit reached 20 billion won, marking a return to profitability after three quarters, while revenue approached nearly 1 trillion won for the first time in a year. LGES (LG Energy Solution) returned to profitability, recording an operating profit of 113 billion won, driven by increased volumes of small cylindrical batteries and reduced fixed costs resulting from expanded ESS production in North America.
However, the petrochemicals division is expected to post a loss of 53.8 billion won in the third quarter. Research Analyst Jeon explained, “Unlike the first half, which reflected the positive lag effect from using low-cost raw materials, the third quarter will inevitably see a negative lag effect due to the use of high-cost raw materials.” He continued, “Since the U.S.-Iran MOU was scrapped in July, armed conflicts have persisted; in particular, Iranian attacks have recently spread to Jordan and Kuwait, so we cannot rule out the possibility of another oil price hike and supply disruptions.”
He explained, “Even if geopolitical tensions ease, it will inevitably take quite some time for Middle Eastern petrochemical facilities to resume operations and for naphtha exports to return to normal; therefore, we expect the chemical supply-demand situation to improve compared to pre-war levels.” He added, “For advanced materials, we forecast an operating profit of 117.5 billion won in the second half, marking a clear improvement from the 23 billion won loss recorded in the first half—a pattern of stronger performance in the second half.”
He noted, “For cathode materials, as shipments to GM resume at the end of the third quarter and sales to new customers begin in earnest, we expect shipments—which totaled less than 10,000 metric tons in the first half—to increase significantly to around 28,000 metric tons in the second half.” He emphasized, “While the cathode material utilization rate remained at just 10–15% in the first half, resulting in a significant fixed-cost burden, it is expected to rise to 35–40% in the fourth quarter, which should lead to a substantial reduction in losses.”
He further added, “We expect that the expansion of ESS separator shipments in North America, along with increased sales of electronic materials—which are the most profitable segment within the advanced materials division—will contribute to improving the Advanced Materials Division’s profits and profit margins in the second half of the year.”