[Click eStock] "LG Saenghwal Geongang, Smooth Earnings Growth... Uncertainty Expands"

[Asia Economy Reporter Song Hwajeong] DB Financial Investment maintained its 'Buy' rating and target price of 1.62 million KRW for LG Household & Health Care on the 30th, stating that although the company continues steady earnings growth, uncertainties are increasing.

LG Household & Health Care's Q4 results last year met consensus expectations. The company recorded consolidated sales of 2.0133 trillion KRW and operating profit of 241 billion KRW in Q4 last year, representing increases of 19% and 14% respectively compared to the same period the previous year. Park Hyunjin, a researcher at DB Financial Investment, analyzed, "Cosmetics duty-free sales grew by 11%, which was a slower growth rate than expected, but sales in China grew by 62%, offsetting the slowdown in duty-free sales growth. New Avon was consolidated, increasing sales in the premium category, and as expected, operating profit margin declined due to New Avon's operating losses and increased marketing expenses."

The novel coronavirus infection (Wuhan pneumonia) is expected to be the biggest variable for Q1 earnings this year. Researcher Park said, "While showing favorable earnings growth, the novel coronavirus will act as a variable for first-half earnings. Firstly, there is concern about a slowdown in domestic consumption in China, and secondly, a decrease in Chinese tourists visiting Korea." It is expected that the epidemic will peak by mid-February, about two weeks after the Lunar New Year, so there is an analysis that it is necessary to temporarily lower expectations for Q1 domestic Chinese earnings. Park added, "However, the decrease in Chinese tourists visiting Korea is expected to be limited, so expectations for the duty-free channel will be maintained. At present, there seems to be no difficulty in achieving a 15% increase in sales and 13% increase in operating profit in Q1, but since variables have emerged, it is necessary to closely monitor the situation and check trends in duty-free and Chinese domestic markets."

Due to increased uncertainty, a conservative approach is needed in the short term. Researcher Park said, "Because the company has demonstrated appropriate risk management capabilities in crisis situations, concerns are lower compared to other consumer companies, and it also shows characteristics of a defensive stock, making it relatively attractive. However, since uncertainty is inherent across the industry, a conservative approach in the short term seems inevitable."

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