LG Chem Ltd.

Basis: FY2021–FY2023 as originally reported by LG Chem (press releases) where available, otherwise S&P Global data; FY2024–FY2025 per 4Q25 Earnings Release (restated for discontinued operations, pre-2026 revenue reclassification). Operating profit includes LGES's IRA production credits as "other operating income".

Income statement: notes and sources

Sources: Revenue/OP FY2022 (KRW 51.8649tn / 2.9957tn) and FY2023 (KRW 55.25tn / 2.53tn) from LG Corp press releases; FY2021 revenue and OP as reported † (S&P restated figure KRW 42,599bn); gross profit FY2021–FY2023, EBITDA FY2021 and FY2023, pre-tax, net income, EPS from S&P Global data; FY2022 EBITDA "KRW 6.4tn" per LG Chem release (S&P: KRW 6,329bn); FY2024–FY2025 from 4Q25 release; FY2023 IRA figure = "other operating expenses" offset line in S&P data (676.9bn) and corresponds to LGES IRA credit †; FY2024–FY2025 IRA credit per 4Q25 release footnote; DPS from 4Q25 release DPS chart. Discrepancy note: S&P restates FY2022 revenue to KRW 50,983bn (vs. 51,865 reported) for later discontinued operations.

Margins and growth

Revenue CAGR FY2021–FY2025: +1.9% p.a. (KRW 42,655bn → 45,932bn). On the restated FY2026 presentation basis (incl. LGES production incentive), FY2025 revenue is KRW 47,579bn, implying a CAGR of ~2.8%.

Note: FY2022 and FY2023 growth rates above are computed on as-reported figures; the company reported +21.8% and +8.4% respectively against its own prior-year bases at the time.

Balance sheet

Sources: S&P Global data (FY2021–FY2023); 4Q25 release for FY2024–FY2025 debt split, cash and equity (S&P figures agree on totals). Short/long split FY2021–FY2023 derived from S&P line items (short-term debt + current portion of LTD + current leases; LTD + long-term leases).

Latest (30-Jun-2026): total assets KRW 112,210bn; cash & short-term investments KRW 12,703bn; total debt KRW 40,322bn; net debt KRW 27,620bn; total equity KRW 48,871bn (of which NCI KRW 13,441bn); liabilities/equity 129.6% (S&P data; Quartr 2Q26 summary). At 31-Mar-2026: short-term debt KRW 13,117bn, long-term KRW 22,538bn, net debt/equity 54.0% (1Q26 release).

Cash flow

Source: S&P Global data; OCF FY2024–FY2025 matches 4Q25 release. No buyback programmes disclosed in the period (treasury stock essentially nil at KRW 0.27bn). Capex is consolidated (dominated by LGES). Ex-LGES capex: KRW 2,376bn (FY2024), KRW 2,893bn (FY2025), plan KRW 1,716bn (FY2026) (4Q25 release).

TTM to Jun-2026: OCF KRW 6,172bn; capex KRW 10,208bn; FCF KRW –4,036bn (S&P data). 1Q26 OCF was negative (KRW –176bn) on a KRW 1.8tn working-capital build as feedstock prices spiked (1Q26 release).

Ratios

Cash conversion cycle (computed from year-end balances): FY2024 ~107 days (DSO 61, DIO 78, DPO 33); FY2025 ~97 days (DSO 53, DIO 78, DPO 34). ROIC = OP × (1–24%) ÷ (total equity + net debt); analyst estimate, not company-reported.

Quarterly trajectory

Zero values in the 2025-presentation row for 2026 quarters indicate "not presented on that basis". Sources: 4Q25 release, 1Q26 release, DART preliminary results 31-Jul-2026, RTTNews.

Commentary on trends, inflections and drivers

Revenue. The FY2021–FY2023 surge (to a KRW 55.25tn peak) was driven by LGES volume growth and high metal pass-through prices in cathode. The FY2024–FY2025 decline (–11.9%, –5.7%) reflects lithium/nickel price deflation flowing through cathode and cell ASPs, North American EV demand weakness, and a soft petrochemical cycle. 2Q26 revenue (+19% YoY) marks an inflection driven by LGES ESS shipments, higher petrochemical prices (naphtha pass-through after the Iran-war shock) and cathode recovery.

Profitability. The defining feature of FY2024–FY2025 is that consolidated operating profit was entirely attributable to US government production credits: excluding KRW 1.48tn and 1.65tn of IRA credits, LG Chem lost KRW 605bn and 466bn at the operating line. Petrochemicals has been loss-making for two consecutive years. EBITDA held up (KRW 6.5tn in FY2025) because depreciation rose with LGES's capacity build (D&A KRW 5.35tn in FY2025 vs. 2.84tn in FY2021).

Below the line. FY2025 non-operating expenses of KRW 2.96tn — chiefly KRW 1.98tn of asset write-downs and KRW 0.79tn of losses on asset disposals (S&P data), concentrated in 4Q25 (KRW –2.08tn non-operating) — produced a consolidated net loss of KRW 977bn and an owners' loss of KRW 1.82tn. 1Q26 added another KRW 516bn of non-operating charges. These impairments are consistent with management resizing petrochemical and battery-materials asset bases.

Balance sheet. Net debt more than doubled from KRW 7.5tn (FY2022) to KRW 27.6tn (Jun-2026); liabilities/equity rose from ~90% (1Q24) to 129.6% (2Q26). Interest expense rose from KRW 211bn (FY2021) to KRW 1.22tn (FY2025), so that operating profit no longer covers interest (0.97x). This is the core reason for the asset-sale programme, LGES share monetisation, Moody's downgrade to Baa2, and the sharp cut in ex-LGES capex for FY2026 (–41% to KRW 1.72tn).

Cash flow. Consolidated FCF has been negative for five straight years (cumulative ~KRW –26.6tn) because LGES capex ran at KRW 12–15tn p.a.; OCF itself is healthy (KRW 7–8tn). The FCF profile should improve from FY2026 as LGES capex moderates, but LGES cash largely benefits LGES (and its 20.6% minority holders) rather than LG Chem's parent balance sheet.

Management guidance (2026)

Ex-LGES revenue KRW 23.0tn; Petrochemicals KRW 16.6tn; Advanced Materials KRW 4.5tn with new cathode orders ramping from 2H26; Life Sciences KRW 1.38tn; ex-LGES capex KRW 1.72tn. Near term: 3Q26 Petrochemicals profitability to decline on negative inventory lag and higher logistics costs; Advanced Materials to grow on new cathode customers, ESS separators and electronic materials; LGES revenue growth from North American ESS; Life Sciences and Farm Hannong profitability lower in 3Q26 (Quartr 2Q26 summary).

Consensus expectations

Eugene forecasts 3Q26 sales of KRW 14.8tn (+33% YoY) and OP of only KRW 110.4bn (–82% QoQ). Simply Wall St aggregates forecast revenue growth of ~12.7% p.a. and a return on equity of ~7% in three years — figures should be treated as indicative.

Bull case

1. Restructuring catalysts converge: a signed LG–GS Caltex Yeosu JV plus BPA partial sale would lower petrochemical losses structurally while releasing capital, at a time when ~2.5 Mt of Korean capacity is already being removed.

2. NAV discount compresses: further LGES monetisation (to ~70%) at reasonable prices would fund deleveraging and returns; at ~0.55x P/B even partial discount closure is material.

3. Mix shift is real: 2Q26 showed Advanced Materials and Life Sciences returning to profit, cathode ASP +20% QoQ (Hana), and the KRW 2tn electronic materials ambition targets AI-packaging demand with higher margins.

Bear case

1. Earnings remain subsidy- and lag-dependent: ex-IRA OP was negative in FY2024–FY2025, and the 2Q26 beat came from inventory gains guided to reverse in 3Q26.

2. Balance sheet stretch: net debt KRW 27.6tn, liabilities/equity ~130%, OP not covering interest; further asset sales may be forced at weak valuations.

3. Battery-materials share loss: losing Tesla volumes at its own affiliate signals a technology gap against L&F and others, undermining the Tennessee investment case if North American EV demand stays weak.

Catalysts and monitorables (next 12 months)

Analyst verdict

LG Chem is a company whose reported numbers conceal its economic reality. On paper it is a KRW 46–50tn-revenue diversified chemical group returning to profit in 2Q26; in substance, its wholly owned businesses lost money at the operating line in both FY2024 and FY2025 once LGES's US production credits are removed, its petrochemical core is structurally challenged by Chinese capacity and has just been exposed to an acute feedstock shock, and its battery-materials bet has stalled under weak North American EV demand and a reported technology gap at the high-nickel frontier.

Against that, three things argue against outright pessimism. First, management is acting: KRW 1.6tn of non-core assets sold, KRW 2tn of LGES shares monetised, ex-LGES capex cut by ~40%, and a credible plan to consolidate the Yeosu crackers. Second, the specialty franchises — semiconductor/IT materials, Life Sciences, Farm Hannong — are profitable and are the explicit priority of a CEO who built the advanced-materials business. Third, the valuation already discounts much of the bad news: at ~0.55x book and a holding discount activists measured at ~74%, the equity embeds little value for the parent's own operations.

The investment debate therefore reduces to execution sequencing. If the GS Caltex deal is signed, LGES stake sales proceed at sensible prices, and Tennessee and electronic-materials volumes ramp in 2H26–2027, leverage can stabilise below rating triggers and the discount should narrow. If instead the 3Q26 inventory reversal is followed by a soft 2027 petrochemical market and further impairments, the company risks being forced into dilutive or fire-sale disposals. On balance, the risk/reward is balanced-to-modestly-positive for patient investors with an event-driven horizon, but the thesis is a restructuring story, not a cyclical recovery — and should be underwritten on execution milestones rather than on headline quarterly profits.