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Investing.com - HSBC downgraded LG Chem Ltd (KS:051910) (OTC:LGCLF) from Buy to Hold, setting a price target of KRW290,000.00 as the recent stock rally appears to have priced in potential benefits from its LG Energy Solution stake.
The South Korean chemical company’s shares have surged 41% over the past three months, significantly outpacing the KOSPI index’s 25% gain during the same period, according to HSBC’s analysis.
HSBC cited limited upside potential and growing caution about downside risks to core earnings from the prolonged downcycle in petrochemicals and battery materials, despite optimism surrounding LG Chem’s 81.8% stake in LG Energy Solution.
The research firm applied a lower NAV discount to the LG Energy Solution stake (73% from 80%) in its sum-of-the-parts valuation, assuming LG Chem retains a 60% stake to maintain control while potentially monetizing the remaining 21.8% stake.
HSBC noted that bullish sentiment already appears priced into the stock after its strong rally, with the implied NAV discount on the LG Energy Solution stake reaching 67%, similar to the average NAV discount observed across Korean holding companies.
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