LG International ( KS)
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- Trevor Shepherd
- 5 years ago
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1 April 15, 214 (112 KS) Clearer visibility on long-term earnings growth BUY (MAINTAIN) Price (Apr. 14) W3,15 Target Price W38, % variance 26.% MinHo Hur (82-2) hiroo79@shinhan.com KOSPI 1,997.2p KOSDAQ 562.4p Market Cap. W1,168.6bn/US1,25.1mn Par Value W5, Outstanding Shares Free Floating Shares 52-Week High/Low 6-Day Avg. Trading Volume 6-Day. Avg. Trading T/O 38.8mn 27.9mn(71.9%) W39,/W26,45 27,774shrs W5,958mn Foreign Ownership 1.17% Major Shareholders Bon-Jun Koo and 43 others 27.88% National Pension Service (NPS) 12.86% Absolute Performance 3M 4.5% 6M -3.8% 12M -22.% Relative performance 3M 1.8% to KOSPI 6M -2.7% 12M -24.8% Retain BUY and target price of W38,, share price at long-term trough 1Q preview: OP of W25.9bn (+211% QoQ), pre-tax profit of W26.4bn 214 forecast: OP of W13.7bn (+33%), pre-tax profit of W138.bn (+85%) Retain BUY rating and target price of W38,, share price at long-term trough We retain BUY and target price of W38, for. Earnings from commodity trading and resource development are not likely to rebound in 214 due to the weak commodity market. However, we expect earnings recovery in the mid/long-term led by project organization along with growth of new industrial materials businesses including the green business (palm oil, afforestation, etc.) and downstream pursuits (coal/chemical engineering plants in China). New businesses should lead to stable earnings in 214 and resumption of growth in 215. The current PER is 11.x based on 214F earnings and 8.3x based on 215F earnings. Considering the heightened visibility of earnings improvement, the current share price represents the mid-to-long-term trough. 1Q preview: OP of W25.9bn (+211% QoQ), pre-tax profit of W26.4bn We expect 1Q14 operating profit of W25.9bn (+211% QoQ) and pre-tax profit of W26.4bn (swing to the black). The low comparison base from major one-off costs booked in 4Q13 should lead to QoQ improvement. 2Q outlook: Project income on successful financing In April, obtained financing from the Export-Import Bank of Korea for the Turkmenistan petrochemical plant project (worth W3.7tr). It will organize the project from planning and consortium formation to funding and procurement. The project is expected to generate a total of W133.7bn in operating profit over the next four years and yield an operating margin of 3.6%, higher than the trading business. The company is expected to book contingency fees of about W2bn in 2Q14 and operating profit of W7bn-8bn every quarter. 214 forecast: OP of W13.7bn (+33% YoY), pre-tax profit of W138.bn (+85% YoY) is forecast to post operating profit of W13.7bn (+33% YoY) and pre-tax profit of W138.bn (+85% YoY) for 214. We expect profits of W71.1bn from industrial materials, W4.bn from green and non-ferrous metal trading, and W94.bn from resource development. Year to Dec. Sales OP Pre-tax NP EPS Growth BPS PER EV/EBITDA PBR ROE Net Debt (W bn) (W bn) (W bn) (W bn) (Won) (%) (Won) (X) (X) (X) (%) Ratio (%) , ,72 (1.5) 37, , ,242 (78.3) 38, F 12, , , F 13, , , F 13, , ,
2 Resource development earnings 1Q13 2Q13 3Q13 4Q13 1Q14F 2Q14F 3Q14F 4Q14F F 215F 216F KRW/USD exchange rate 1,84 1,122 1,112 1,62 1,7 1,65 1,65 1,55 1,127 1,95 1,64 1,4 1,3 Dubai crude (USD/bbl) Newcastle coal (USD/ton) LME copper (USD/ton) 7,916 7,162 7,85 7,1 7,6 7, 7,18 7,53 7,956 7,316 7,33 6,748 6,463 Share of output Coal (mn tons) Oil/gas (mn Boe) Copper (1, tons) Source: Shinhan Investment Corp. Quarterly earnings (bn KRW, %) 1Q13 2Q13 3Q13 4Q13 1Q14F 2Q14F 3Q14F 4Q14F F 215F 216F Sales 2,884. 3,122. 3, ,9.6 2, ,86.5 3, , , , , , ,426.7 Industrial goods 2, ,282. 2, , ,45.7 2, ,53.5 2, , , , , ,783.3 Resources/commodities , , ,21.3 3,46.8 3,643.4 OP Industrial goods Non-ferrous metals/green (.2) (1.4) (6.2) (1.3) (18.1) Coal (1.4) Oil gas Equity method gains + dividend income (38.1) (16.) Industrial goods.4 (4.5) (2.9).4 (2.8) (2.3) (.3) (6.6) (5.2) Non-ferrous metals/green (47.3) (.8) (.8) (.8) (.8) 1.3 (45.3) (3.2) (1.6) (1.2) Coal Oil/gas Others Pre-tax OP (29.8) Industrial goods Non-ferrous metals/green (2.2) (11.5) (9.5) (21.2) (.5) (18.4) Resource development (12.9) Coal Oil/gas Non-ferrous metals (27.5) (19.)... Pre-tax profit (26.6) NP (27.4) OPM Pre-tax margin (.9) Note: 1) Pre-tax OP = OP + equity method gains + dividend income 2) 1Q13 and 2Q13 figures for each business segment are estimates 2
3 Earnings estimate revision (bn KRW, %) Before After Change 214F 215F 214F 215F 214F 215F Sales 12, , , ,55.3 (.) (.1) OP Pre-tax profit (.8) 4.2 NP (.8) 4.2 OPM Pre-tax margin Source: Shinhan Investment Corp. 12-month forward PER band 12-month forward PBR band (KRW) 8, (KRW) 8, 1.8x 1.5x 15x 12x 1x 7x 1.2x 1.x.6x 4x Valuation of domestic trading companies PER PBR EV/EBITDA EPS Growth ROE (x, bn, %) 13 14F 15F 13 14F 15F 13 14F 15F 13 14F 15F 13 14F 15F Daewoo International (37.6) SK Networks TN TP 6.4 (2.) (78.3)
4 Balance Sheet Year to Dec. (W bn) F 215F 216F Assets 4, ,877. 5,73.3 5, ,375.5 Total Current Assets 2, ,799. 3,18.6 3,29.5 3,374.4 Cash and Cash Equivalents Accounts Receivables 1,317. 1,18.9 1,345. 1, ,459.4 Inventories Non-Current Assets 2,22. 2,78. 2,54.7 2,22.8 2,1. Tangible Assets Intangible Assets Investment Assets Other Financial Institutions Assets..... Liabilities 3, , , , ,455.2 Current Liabilities 2, , ,48. 2, ,466.6 ST Borrowings Account Payables 1, ,239. 1, , ,58.6 Current Portion of LT Debt Non-Current Liabilities ,18.2 1,11.2 1, Bonds LT Borrowings(incl. LT Fin. Liab.) Other Financial Institutions Liab Shareholders' Equity 1, , , , ,92.2 Capital Stock Capital Surplus Other Reserves (1.6) (1.6) (1.6) (1.6) (1.6) Accu. Other Comp. Income Retained Earnings 1,96.9 1,125. 1, , ,478.9 Owners of Parent Equity 1, , , , ,777.6 Non-Controlling Interests Equity *Total Debt 1, , , , ,593.7 *Net Debts(Cash) , , Profit and Loss Year to Dec. (W bn) F 215F 216F Sales 12, , , , ,426.7 Growth (%) (8.5) (5.6) COGS 12, , , , ,674.8 Gross Profit Gross margin (%) SG&A Operating Income Growth (%) 2.4 (52.2) Operating margin (%) Other Net Non-Operating Profits 94.4 (23.8) Financial Income(Expenses) (36.8) (4.7) (27.6) (15.7) (11.) Net Other Non-Operating Profits Net Gains in Asso., Subs., and JVs 24.9 (29.9) Pre-tax Profit from Cont. Op Income Taxes Profit from Continuing Op Profit from Discontinued Op Net Profit Growth (%) (12.4) (8.8) Net Profit margin (%) Net Profit of Parent Net Profit to Non-Controlling 7.6 (4.1) Total Comprehensive Income Total Comp. Income of Parent Total Comp. Income to Non-Cont. (4.4) (5.1) (13.) (33.8) (39.2) EBITDA Growth (%) (5.3) (16.) (.7) EBITDA Margin (%) Note: Operating profit is based on 212 K-IFRS (gross profit - SG&A costs) Cash Flow Year to Dec. (W bn) F 215F 216F Operating Cash Flow (173.5) Net Profit Depreciation Amortization Losses(Gains) on F/X Translation (28.3) 1.9. (8.) (8.) Losses(Gains) on Disp. of Assets..... Losses(Gains) in Asso.., Subs.,JVs.. (25.6) (49.1) (58.7) Chg. in A/L from Op. Activities 37.2 (287.) 33.7 (29.4) (18.8) (Payments of Income Taxes) (89.1) (146.5) (31.7) (42.2) (48.9) Others (14.8) Investing Cash Flow (261.9) (235.2) (94.1) (2.7) 4.6 Incr. in Tangible Assets(CAPEX) (47.6) (9.1) (15.) (16.) (16.) Decr. in Tangible Assets Decr.(Incr.) in Intangible Assets (139.4) (89.2) (12.) (1.) (1.) Decr.(Incr.) in Investment Assets 27.3 (12.) (39.7) Others (16.4) (17.9) (27.4) (5.2) (.8) Free Cash Flow (138.3) Financing Cash Flow (45.1) (6.2) (61.5) (71.9) Incr.(Decr.) in Borrowing.. (48.6) (48.) (52.6) Decr.(Incr.) of Treasury Stock..... Dividend (19.3) (22.2) (11.6) (13.5) (19.3) Others (25.8) (.). (.) Other Cash Flows.. (9.8) (1.1) (1.2) Change of Consolidated Scope..... Difference by Chg. in F/X Rates (5.8) Incr.(Decr.) in Cash (149.4) Beginning Cash Ending Cash Key Ratios Year to Dec F 215F 216F EPS_C (won) 5,915 1,138 2,742 3,642 4,222 EPS_P (won) 5,72 1,242 2,79 3,598 4,172 BPS_C (won) 41,682 41,628 42,675 45,818 49,542 BPS_P (won) 37,894 38,76 39,91 42,19 45,863 DPS (won) PER_C (x) PER_P (x) PBR_C (x) PBR_P (x) EV/EBITDA (x) EV/EBIT (x) Dividend Yield (%) Profitability EBITTDA Margin (%) OP Margin (%) NP Margin (%) ROA (%) ROE (%) ROIC (%) 15.3 (2.3) Stability D/E Ratio (%) Net Debt to Equity (%) Cash Ratio (%) Interest Coverage (x) Activity (%) Working Capital Turnover (t) Inventory Turnover (d) Receivable Turnover (d)
5 Share Price Performance (won) (Indexed,Apr-13=1) 45, 11 KOSPI Index = 1 35, 15 3, 1 25, 95 15, 9 1, 5, /13 8/13 12/13 4/14 Price (LHS) Relative Performance to KOSPI (RHS) Target Price & Recommendation History (won) 7, 5, 3, 1, 4/12 1/13 1/13 Target Price (LHS) Price (LHS) Recommendation (RHS) BUY Trading BUY HOLD REDUCE Compliance Notice Analyst Certification: The following analysts hereby certify the information and material presented in this report are accurate expressions of their views, and that they have not received wrongful pressure to express such views: MinHo Hur. As of the date of this report's publication, Shinhan Investment Corp.'s shareholdings in the company mentioned in this report() do not exceed 1% of outstanding shares of the company. As of this date, Shinhan Investment Corp. has not participated as the lead underwriter or advisor in issuance of the securities of the company during the past 1 year. Shinhan Investment Corp. confirms it has issued ELS based on the LG International's underlying asset. As of this date, the covering analyst does not possess any financial interest in the securities or debt instruments convertible into such shares of the company, which is required to be disclosed by law, and has not and will not receive any compensation of any kind whatsoever in exchange for expressing specific recommendations. All opinions and estimates regarding the company and its securities are accurate representations of the covering analyst's judgments as of this date, and may differ from actual results. This report is intended to provide information to assist investment decisions only and should not be used or considered an offer or the solicitation of an offer to sell or to buy any securities. Stock selection and final investment decisions should be made at the client's own discretion. This report is distributed to our clients only, and any unauthorized use, duplication, or redistribution of this report is strictly prohibited. History Table Recommendation Target Price (won) BUY 65, BUY 61, BUY 59, BUY 45, BUY 41, BUY BUY 39, BUY 38, BUY 35, BUY 38, SHIC Rating Classifications (As of 25 Jul. 211) Stock BUY: Expected return of over +15% in the next 6 months Trading BUY: Expected return of % ~ +15% in the next 6 months HOLD: Expected return of -15% ~ % in the next 6 months REDUCE: Expected return of below -15% in the next 6 months Sector OVERWEIGHT: Prevalence of BUY rating for stocks in our sector coverage universe based on market cap NEUTRAL: Prevalence of HOLD rating for stocks in our sector coverage universe based on market cap UNDERWEIGHT: Prevalence of REDUCE rating for stocks in our sector coverage universe based on market cap 5
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More informationKolon Industries (120110)
KOREA November 25, 2011 Company Analysis Kolon Industries (120110) BUY (maintain) Undervalued Even in Worst-case Scenario Dongkun Kim Analyst / Hybrid Chemicals 82-2-2003-2907 dongkun.kim@hdsrc.com Daeyong
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(7184 KS) Nothing left to lose Retail Earnings Preview April 6, 216 (Maintain) Buy Target Price (12M, W) 69, Share Price (4/5/16, W) 52,4 Expected Return 32% OP (16F, Wbn) 175 Consensus OP (16F, Wbn) 176
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(1211 KS) Another beneficiary of China momentum! Korea Equity Research Chemicals Buy Maintain Buy; Raise TP to W72, We maintain our Buy call on Kolon Industries and raise our target price to W72,, from
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(9846 KQ) An opportune time to buy Technology Earnings Preview July 12, 216 (Maintain) Buy 2Q16 preview: Strong earnings expected We expect s 2Q16 revenue and operating profit to come in at W44.bn (+17%
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(041510 KQ) Time to buy Entertainment Results Comment November 14, 2016 (Maintain) Buy Target Price (12M, W) 40,000 Share Price (11/11/16, W) 29,050 Expected Return 38% OP (16F, Wbn) 28 Consensus OP (16F,
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(036570 KS) An attractive dividend growth stock for 2H Game Earnings Preview (Maintain) Buy Target Price (12M, W) 270,000 Share Price (07/10/15, W) 209,500 Expected Return 29% OP (15F, Wbn) 310 Consensus
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(041510 KQ) A Chinese entertainment play Entertainment Results Comment February 18, 2016 (Maintain) Buy Target Price (12M, W) 59,000 Share Price (02/17/16, W) 38,500 Expected Return 53% OP (15F, Wbn) 36
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Company Brief / Construction April 2, 212 12M rating BUY (Maintain) 12M TP W158, from W158, Up/downside +67% Stock Data KOSPI (Apr 18, pt) 2,5 Stock price (Apr 18, KRW) 94,6 Market cap (USD mn) 4,386 Shares
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(001120) Solid 4Q, excluding one-offs (LGI) yesterday reported that its consolidated sales rose 3.8% q-q to KRW3.8t in 4Q, but that its operating profit plunged 98% q-q to KRW600m with a net loss of KRW237.2b,
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Korea/Pharmaceuticals Daewoong Pharmaceutical Earnings preview BUY 12 July 2010 BUY BUY BUY 4 May 2010 16 Apr 2010 23 Mar 2010 Ji-Won Shin, Korea Pharmaceuticals Analyst, +82 2 3774 2176 jwshin@miraeasset.com
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