From Smartphones to TVs... LG Electronics' Entire Divisions at a Crossroads This Year

Key to 5G Smartphone Market Settlement
OLED TV Shipments Increase but Cost Burden Also Rises
White Goods Stall... Expansion of New Growth Appliances Like Air Purifiers Overseas Is a Positive Factor

[Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] An analysis has emerged that all business divisions of LG Electronics are at a turning point. It is said that this year, LG Electronics must take a decisive step to secure stable growth drivers in the future, such as the establishment of 5G smartphones, expansion of OLED TV shipments, and overseas achievements in new growth home appliances.

On the 5th, Hi Investment & Securities forecasted that this year will be a year of coexistence of risks and opportunities for LG Electronics. Although sales in the fourth quarter of last year were somewhat sluggish, considering that it was a period of concentrated cost expenditure, the focus should be on this year's performance.

First, the smartphone business division (MC) is expected to reduce its deficit by about 100 billion KRW annually this year due to the relocation of domestic plants to Vietnam and the expansion of Original Design Manufacturing (ODM). However, it was pointed out that the situation of declining smartphone shipments needs to be improved. Last year, LG Electronics' smartphone shipment growth rate was expected to be minus (-) 28.3%. This reduction in scale is offsetting the effect of fixed cost reduction. Go Eui-young, a researcher at Hi Investment & Securities, said, "To discuss true improvement, successful establishment in the North American 5G smartphone market and a rebound in shipments must precede." Last year, the MC division is estimated to have recorded sales of 6.107 trillion KRW and an operating loss of 961 billion KRW.

The HE (Home Entertainment) division, which oversees TVs, is analyzed to have rising sales but limited profitability improvement. OLED TV shipments are expected to increase from 1.7 million units last year to 2.6 million units this year, enabling external growth, but the cost burden is increasing due to rising LCD TV panel prices, and price competition is becoming fiercer. This year, HE division sales are expected to increase by 3.9% from last year to 17.07 trillion KRW, while operating profit is forecasted to fall by 13.1% to 921 billion KRW.

The H&A (Home Appliances & Air Solution) division, responsible for home appliances, is also expected to see a slowdown in growth. This is because competition in white goods is intensifying, and the growth rate of new growth home appliances such as dishwashers and air purifiers is slowing domestically. However, it is a positive indicator that the overseas sales ratio of new growth home appliances exceeds 10%. Sales this year are predicted to be 22.277 trillion KRW, with operating profit of 2.177 trillion KRW.

LG Electronics' total sales this year are expected to reach 64.059 trillion KRW, an increase of 2.2% from last year. Operating profit is forecasted to increase by 11.3% to 2.862 trillion KRW. Researcher Go said, "Although uncertainties remain across business divisions, considering the improved profit-generating ability since 2017, it is still an attractive stock," adding, "The price-to-book ratio (PBR) based on a 12-month trailing basis is 0.87 times, and with LG Display, an equity-method affiliate, turning profitable, the return on equity (ROE) is expected to reach 10.1% this year." Hi Investment & Securities gave LG Electronics a 'Buy' investment opinion with a target price of 84,000 KRW. The closing price on the 3rd was 71,100 KRW.

This content was produced with the assistance of AI translation services.