- LG Chem’s revenue in the first three quarters of 2025 declined due to weak sales in the new energy and European markets, but its profitability improved thanks to proactive cost management.
- Despite operational challenges, its collaboration with Zeiss and Sinopec coupled with the upcoming mass production of new battery plant and the successful signing of automotive battery orders suggest promising future growth.
- The Group's stable business supports its creditworthiness. Its USD bonds have maturities ranging from 0.6 to 5.6 years, with net yields to maturity of approximately 3.5% to 4.2%, suitable for investors seeking stable returns
LG Chem's most core business currently is its new energy sector, which accounts for 47% of total revenue (see Chart 1). This segment was spun off into a separate publicly traded company in 2022, named LG Energy Solution (LGES). LGES primarily focuses on battery manufacturing, including key raw materials for lithium batteries such as cathode materials, separators, and electrolytes, selling these products to downstream supply chain partners to secure orders.
Additionally, the petrochemical segment accounts for approximately 38% of the group's revenue, with key products including basic chemicals and plastic materials used in the construction, automotive, and home appliance industries.
The advanced materials business, which makes up about 10% of the revenue, focuses on the development of high-performance materials, such as those used in semiconductors and displays (like OLED materials), battery separators, and thermal management materials. Major clients include Samsung, LG Electronics, Tesla, and Toyota.
The life sciences segment, representing about 3% of revenue, operates in the healthcare field, providing therapeutic drugs, vaccines, and diagnostic tools. The agricultural technology business, accounting for approximately 2% of revenue, is run by the subsidiary Farm Hannong and is involved in agricultural chemicals and seed technology.
In the first three quarters of 2025, the group's total revenue was approximately KRW 34.7 trillion, a 5.2% year-on-year decline (see Chart 2). Breaking it down by business, the second-largest segment, petrochemicals, remained stable; the revenue decline primarily reflected a noticeable drop in battery sales in Europe, which fell by 10.7% year-on-year to KRW 17.5 trillion this year.
However, the group has actively managed costs this year, resulting in operating profit growth of 36% year-on-year to KRW 1.6 trillion, significantly higher than the estimated operating profit of around KRW 0.9 trillion for all of 2024. This marks a turnaround from the declining trend over the past four years and shows an improvement in overall profitability.
This demonstrates that while LG Chem has petrochemical and other businesses as its foundation, the battery sector, contributing 43% of its revenue, has a significant impact on its overall operating performance. In the following, we will analyse the Group's battery and petrochemical businesses.
Amid challenges in energy and petrochemical businesses, the group’s outlook is gradually becoming clearer
In the battery market, considering only the listed subsidiary LGES, the company is facing challenges such as a reduction in the new energy vehicle boom across Europe, the gradual withdrawal of subsidies, and competition from Chinese electric vehicle manufacturers (like CATL) that are capturing orders. However, due to strong demand for energy storage systems from customers in North America, coupled with proactive cost management, the company’s operating profit has increased nearly 83% to KRW 1.5 trillion, accounting for over 80% of the group’s operating profit in the first three quarters of 2025, making its profitability better than other segments.
It is worth noting that due to the significant capital expenditures and lengthy R&D cycles in the battery market, coupled with LGES's lower market share in liquid battery technologies (such as NMC and LFP) compared to its peers, and the lack of significant breakthroughs in solid-state battery development, the market remains cautiously optimistic about its prospects.
According to global rankings of power battery installations from 2020 to 2024 (see Chart 3), LGES is one of the top five battery manufacturers globally. However, its market share has decreased from 23% in 2020 to 11% in 2024, while domestic competitors like CATL and BYD have continued to expand their market share, posing challenges for the group.
Nevertheless, the group has recently gained some positive news, including a cooperation agreement with Sinopec for sodium-ion batteries, and the construction of North America’s largest battery factory in Queen Creek, producing cylindrical and LFP batteries, expected to start mass production in 2026. Collaborations with brands like Mercedes-Benz are also in place, which is projected to contribute approximately 20% of the group’s capacity, further strengthening its performance in North America. With numerous automotive battery orders over the next decade, the group still can convert capacity into revenue.
In the petrochemical sector, the decline in crude oil prices has reduced polymer product prices, enhancing competitiveness. However, this business heavily relies on crude oil priced in U.S. dollars, making costs susceptible to exchange rate fluctuations. If large orders are not secured early, overall uncertainty will be higher. The group also faces challenges from U.S. tariff policies and Chinese competitors (like Sinochem) that benefit from lower labour costs and product prices, leading us to anticipate limited revenue growth for this segment in the coming years.
Nonetheless, we note that the group is actively seeking new business opportunities, including a recent cooperation agreement with Zeiss to jointly produce specialized films for automobile head-up displays, which may help ensure stable future capacity for the group.
The group’s financial situation is solid, with a trend of easing leverage growth rate
In the first half of 2025, the group’s EBITDA was KRW 3.4 trillion, a year-on-year increase of 21.3% (see Table 1); operating cash flow also surged by 66.1% year-on-year to KRW 3.2 trillion. Notably, on October 1 of this year, the group announced plans to sell approximately KRW 2 trillion (1.4 billion USD) worth of shares in LGES, which accounts for about 2% (after the sale, the group will still hold about 79% of LGES). The proceeds will be used to repay loans taken out for the development of the battery and biotechnology segments. Given that LGES’s current market cap is close to 100 trillion KRW, the group still has ample room to manage its credit risk, with minimal short-term liquidity issues.
As of June 30, 2025, both short-term and long-term debts for LG Chem have risen, with total debt reaching KRW 31.8 trillion, a year-on-year increase of 16.1%, resulting in a net debt ratio of 52.3%. However, the group's cash and cash equivalents have increased to KRW 8.5 trillion compared to the end of 2024, while the growth rate of net debt/EBITDA has slowed compared to last year, currently standing at 3.8 times, which is still decent. With the group continuing to implement cost-saving measures, we believe the likelihood of a significant deterioration in its credit metrics in the short term is low.
| KRW Trillion | FY2023 | FY2024 | 2025 Jun |
| Short Term Debt | 7.1 | 7.6 | 9.6 |
| Long Term Debt | 14.9 | 19.8 | 22.2 |
| Cash and Cash Equivalent | 9.1 | 7.9 | 8.5 |
| Net Gearing Ratio (%) | 30.9% | 39.8% | 52.3% |
| Total Debt / EBITDA (x) | 2.0 | 3.4 | 3.8 |
| Operating Cashflow | 7.5 | 7.0 | 8.3 (TTM) |
| Interest Coverage Ratio (x) | 3.9 | 1.0 | 1.5 |
| Source: Company's Reports, iFAST compilations Data as of 30 June 2025 | |||
However, we also found that the company recorded over KRW 3 trillion in foreign exchange adjustment income in other comprehensive income for the fiscal year 2024, which was significantly reduced in the first half of fiscal year 2025. This situation may be attributed to the depreciation of the Korean KRW since 2021. Given the high proportion of the company’s overseas business (including in the U.S., China, and Europe), and the fact that the exchange rates used in the balance sheet and income statement are drawn from different time periods, there could be significant adjustments to the equity portion, which may impact various credit metrics.
Net bond yield ranges from approximately 3.5% to 4.3%, suitable for investors seeking stable returns
In March of this year, S&P downgraded LG Chem's issuer and bond credit rating to BBB, but it remains in the investment-grade category. Currently, the group has three U.S. dollar bonds with maturities ranging from 0.6 to 5.6 years, offering net yields of 3.5% to 4.2% (see Table 2).
Additionally, the group's subsidiary LGES also has similarly dated bonds rated BBB, with net yields ranging from 3.8% to 4.3%. Although LG Chem’s bond yields are relatively lower, considering the stability of the group’s non-battery business and the relatively low credit risk, investors seeking stable returns may prioritize the "LGCHM 3.625% 15Apr2029 Corp (USD)" and "LGCHM 2.375% 07Jul2031 Corp (USD)", both with net yields above 4%.
| Bond | Issuer | Years to Maturity | Ask Price (Investor Buy) | Net Ask YTM |
| LGCHM 1.375% 07Jul2026 Corp (USD) | LG Chem | 0.6 | 98.3 | 3.5% |
| LGENSO 5.625% 25Sep2026 Corp (USD) | LGES | 0.8 | 101.0 | 3.8% |
| LGCHM 3.625% 15Apr2029 Corp (USD) | LG Chem | 3.4 | 98.2 | 4.0% |
| LGENSO 5.375% 02Jul2029 Corp (USD) | LGES | 3.6 | 103.1 | 4.2% |
| LGCHM 2.375% 07Jul2031 Corp (USD) | LG Chem | 5.6 | 89.9 | 4.2% |
| LGENSO 5.375% 02Apr2030 Corp (USD) | LGES | 4.3 | 103.3 | 4.3% |
| Source: FSMOne Data as of 28 November 2025 | ||||
Related Risks
Although the group has a diversified business portfolio, it is important to note that more than half of its operations are still focused on the new energy (battery) sector, making its performance significantly influenced by developments in the electric vehicle industry.
The group is also exposed to the risk of Korean won depreciation. If this trend continues, the cost of procuring oil or other raw materials priced in U.S. dollars will increase, putting pressure on the group’s expenses.
Furthermore, the compliance costs within the industry are extremely high, particularly for new materials and battery raw materials, which often involve handling large quantities of toxic chemicals or heavy metals. If products are found to exceed harmful substance thresholds, it may require product recalls or line shutdowns for remediation, potentially threatening the group’s operations.
Conclusion
LG Chem’s revenue in the first three quarters of 2025 declined due to weak sales in the new energy and European markets, but its profitability improved thanks to proactive cost management.
Despite operational challenges, its collaboration with Zeiss and Sinopec coupled with the upcoming mass production of new battery plant and the successful signing of automotive battery orders suggest promising future growth.
The Group's stable business supports its creditworthiness. Its USD bonds have maturities ranging from 0.6 to 5.6 years, with net yields to maturity of approximately 3.5% to 4.2%, suitable for investors seeking stable returns
Declaration: For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) holds position in LGENSO 5.625% 25Sep2026 Corp (USD) and the analyst who produced this report hold a NIL position in the abovementioned securities.
