LG Chem Rallies Amid Hopes for Earnings Boost From Battery Unit

By Kwanwoo Jun

LG Chem Ltd.'s shares rallied Tuesday amid expectations that its earnings would be boosted by its electric-vehicle battery-making affiliate.

Shares of the South Korean chemical company, which owns an EV battery maker, LG Energy Solution Ltd., rose as much as 14% to 857,000 won ($648.76) in a morning trade, outperforming the benchmark Kospi's 1.4% gain.

The jump put the stock on course for its sharpest daily percentage gain in almost three years.

The rally in LG Chem shares came as South Korean EV battery stocks were deemed major beneficiaries of the U.S. tax benefits under the U.S.'s Inflation Reduction Act.

LG Chem's consolidated earnings are set to get a boost from the U.S. tax credit that affiliate LG Energy Solution should start receiving from this year, NH Investment & Securities analyst Y.K. Choi said in a research note released Monday.

The NH analyst raised his operating-profit forecast for LG Chem by 20% to KRW783 billion for the first quarter and increased his target price for LG Chem's shares by 11% to KRW1,000,000, after recognizing the U.S.'s advanced manufacturing production credit available to LG Energy Solution.

Meritz Securities analysts Rho Woo-ho and Lee Ji-ho said in a note Monday that they expect LG Energy Solution's U.S. tax credit to more than double annually until 2025.

They estimate the battery maker will get a tax credit of KRW820.1 billion in 2023, KRW2.1 trillion in 2024 and KRW4.7 trillion in 2025, given its targeted annual battery-production capacity of 248 gigawatt hours in the U.S. and 540GWh globally by 2025.

Write to Kwanwoo Jun at kwanwoo.jun@wsj.com

(END) Dow Jones Newswires

April 11, 2023 01:03 ET (05:03 GMT)

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