LK Chem: Profit Margins Remain High but Below 2024 Levels, Shares Trade Above Model Estimate

Thesis

The data supports a picture of a small, profitable company with little debt. Trailing operating margin is 21.6% and net margin is 24.6%, and liabilities are only 10.1% of equity. Cash of ₩17.4B is well above borrowings of ₩3.0B.

The data does not show a clear growth trend. 2025 revenue fell 19.4% and operating income dropped from ₩10.1B in 2024 to ₩4.6B. Trailing free cash flow is slightly negative at about -₩0.3B, so reported profit has not yet turned into surplus cash. The share price is 65.5% below its 52-week high of ₩59,500 but 41.2% above the low of ₩14,550, which shows large swings.

No news headlines are available in the data, so the reasons for recent price moves cannot be determined from it.

Business overview

LK Chem (엘케이켐) operates in the chemicals sector, was founded on 2007-11-01 and listed on KOSDAQ on 2025-02-25. It has 6,391,238 listed shares and a market capitalization of ₩131.3B, small next to the listed peers shown (LG Chem at ₩16.8T, Hanwha Solutions at ₩6.5T). Annual revenue was ₩25.0B in 2024 and ₩20.2B in 2025. Trailing revenue to H1 2026 is ₩24.7B, a recovery from the 2025 level. The data does not describe its products or customers. A filing on 2026-05-14 reported a major sales or supply contract, but its terms are not in the data.

Financial analysis

These figures come from filed financial statements. Trailing revenue to H1 2026 was ₩24.7B, with operating income of ₩5.4B and net income of ₩6.1B. Net income above operating income suggests income from outside operations, though the data does not break this down.

In 2025, revenue was ₩20.2B, operating income ₩4.6B and net income ₩4.4B. The operating margin was 22.6%, versus 40.5% in 2024. Net income in 2024 was ₩6.8B. ROE fell from 19.9% in 2024 to 9.3% in 2025 and is 12.4% on a trailing basis.

The balance sheet is conservative: cash ₩17.4B, borrowings ₩3.0B, liabilities to equity 10.1%. Trailing free cash flow is -₩0.3B. The company pays no dividend.

Valuation

The shares trade at a P/E of 21.6, P/B of 2.1 and P/S of 5.3. At the end of 2025 the P/E was 53.3 and P/B 3.9, so current multiples are lower than the year-end 2025 readings. Enterprise value is ₩117.0B; EV/EBITDA is not available.

Among peers, P/B is 0.5 for LG Chem, 0.7 for Hanwha Solutions, 0.4 for Hanwha, 2.1 for SKC and 0.3 for KCC. LK Chem's P/B is in line with SKC and well above the rest. Peer P/E is available only for Hanwha (6.5) and KCC (0.9), so a P/E comparison is limited.

The valuation model (5-year discounted cash flow at a 7.4% rate, based on trailing figures to H1 2026) gives a base estimate of ₩11,185 per share, with a bear case of ₩8,348 and a bull case of ₩15,886. This is a model estimate based on the assumptions shown, not a target. The share price of ₩20,550 is above even the bull case.

Catalysts

• The half-year report filed on 2026-08-14 showed trailing revenue and profit, and the next periodic filing will update that trend.
• An investor relations event on 2026-08-26 gave the company a chance to explain its results, though the content is not in the data.
• A major sales or supply contract was filed on 2026-05-14, and its effect on revenue may show in later results.
• Foreign investors were net buyers of about ₩128M over 20 days while retail investors were net sellers of about ₩173M, though foreign ownership slipped from 2.8% to 2.5% over 60 days.
• Several insider shareholding reports and a stock option exercise in April 2026 show ongoing changes in insider holdings.

Risks

• Revenue fell 19.4% in 2025 and the operating margin fell from 40.5% to 22.6%, so earnings have not been steady.
• The share price is above the model's base, bear and bull estimates, so the market is pricing in more than the model's assumptions.
• Trailing free cash flow is negative, so profit is not yet turning into surplus cash.
• The share price has swung between ₩14,550 and ₩59,500 in 52 weeks and fell 9.1% in the last month, showing high volatility for a small-cap stock.
• Foreign ownership is only 2.5% and fell over 60 days, and no news headlines are available to explain moves, which limits what the data can show.

Closing view

The filed numbers show a small, profitable, low-debt company whose margins remain high but have come down from 2024 levels. Trailing results to H1 2026 look better than 2025 on revenue and profit, yet free cash flow is slightly negative. The current P/E of 21.6 and P/B of 2.1 are lower than at the end of 2025, but the share price sits above the model estimate range of ₩8,348 to ₩15,886, which depends on its stated assumptions. The data supports a view of solid financial health alongside uncertain growth and a valuation that already reflects a lot of optimism, and it does not point to a conclusion either way.

Model estimate of fair value

Bear

₩8,348

-59%

Base

₩11,185

-45%

Bull

₩15,886

-22%

Model estimate based on the assumptions shown. Not a price target and not a buy or sell signal.

Base case of the 5-year discounted cash flow model on the stock's Valuation tab (statements TTM to H1 2026; discount rate 7.4%). Bear and Bull move the main assumptions by fixed steps. See and change the assumptions

Filings and data used

• Investor relations (IR) eventAug 26, 2026
• Half-year report (Jun 2026)Aug 14, 2026
• Insider shareholding reportMay 19, 2026
• Quarterly report (Mar 2026)May 15, 2026
• Major sales or supply contractMay 14, 2026
• 5%+ holding reportApr 29, 2026
• Insider shareholding reportApr 28, 2026
• Insider shareholding reportApr 28, 2026
• Insider shareholding reportApr 28, 2026
• Insider shareholding reportApr 28, 2026
• Exercise of Stock Purchase OptionsApr 21, 2026
• Annual general meeting resultsMar 26, 2026
• Daily prices up to 2026-10-22
• Financial statements, trailing 12 months as of H1 2026
• Our fair value model, statements as of TTM to H1 2026

Report history

1. Oct 23, 2026InitiationStart of coverage (reader request)LK Chem: Profit Margins Remain High but Below 2024 Levels, Shares Trade Above Model Estimate