LX International's operating profit for Q2 is forecast to more than double compared to the same period last year, driven by rising coal prices in its core business. According to the average forecast from six securities firms compiled by Yonhap Infomax on the 21st, LX International's Q2 operating profit is expected to surge 105.7% year-on-year to 113.1 billion won. Revenue is projected to increase 11.86% to 4.2845 trillion won. The sharp recovery in profitability is attributed to soaring coal prices in the resources sector, with Indonesian ICI4 thermal coal prices reaching $64 per ton, up 36.5% from last year, according to Shinhan Investment & Securities.
Coal Price Surge Drives Profitability Recovery
The significant improvement in profitability is primarily driven by surging coal prices in the resources division. Shinhan Investment & Securities reported that Indonesian ICI4 thermal coal prices reached $64 per ton, representing a 36.5% increase compared to last year. LX International directly operates coal mines in Indonesia and China. While rising oil prices are affecting mining extraction costs and creating some burden, expectations for downward pressure are growing compared to the period when the Middle East war broke out. Additionally, a base effect contributed to the improvement, as waste rock disposal costs were temporarily reflected at some mines in Q2 last year. The trading division's performance is also expected to improve due to overall strong exchange rates and raw material prices. The logistics division is anticipated to expand its scale as rising container shipping rates are reflected.
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Subsidiary Performance Outlook Shows Mixed Results
Forecasts for major subsidiaries LX Glass and the Poseung Green Power cogeneration plant are divided. Some analysts suggest LX Glass's deficit will narrow due to rising glass prices, while Poseung Green Power faces concerns about reduced profits due to regular maintenance inspection costs. Yoo Jae-sun, a researcher at Hana Securities, projected that LX International will record its largest performance since 2022.
Analysts Cite Undervaluation Despite Strong Earnings Visibility
Analysts forecast that the coal price increase driving LX International's strong performance will continue into the second half. Han Seung-hoon, a researcher at Shinhan Investment & Securities, analyzed that "we expect strength in the second half due to gas substitution demand and El Niño effects. Rapid downward stabilization of oil prices will contribute to profitability improvement through lower mining extraction costs." However, the recent stock price has been weak relative to earnings visibility. LX International's stock price formed a peak around 57,000 won in April, then showed a downward trend, trading at 36,650 won as of 10 AM on the 21st, up 0.27% from the previous trading day. The price-to-book ratio (PBR) is also below 0.5.
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Securities firms are monitoring dividend and investment plans to resolve undervaluation. They are placing expectations on the possibility of increased dividends based on performance and entry into new businesses. Yoo Jae-sun stated, "Considering the potential for improvement in controlling net profit, there is sufficient possibility for upward revision of DPS (dividend per share) based on this year's performance," adding, "If investment plans such as new entry into Indonesia's bauxite business and acquisition of additional nickel mines become visible in the second half, medium- to long-term performance expectations can be raised."
FAQ
What is LX International's Q2 operating profit forecast?
LX International's Q2 operating profit is forecast to reach 113.1 billion won, representing a 105.7% increase compared to the same period last year, according to the average projection from six securities firms compiled by Yonhap Infomax on the 21st.
Why is LX International's profitability improving?
The profitability improvement is primarily driven by surging coal prices in the resources sector. Indonesian ICI4 thermal coal prices reached $64 per ton, up 36.5% from last year, according to Shinhan Investment & Securities. LX International directly operates coal mines in Indonesia and China.
