[Click eStock] "LG Electronics Expected to Perform Well in Q1 Despite COVID-19"

Published 12 Mar.2020 08:12(KST)

[Asia Economy Reporter Koo Eun-mo] DB Financial Investment forecasted that LG Electronics will perform well in the first quarter of this year, with operating profit meeting market expectations despite the COVID-19 pandemic. It is regarded as the large IT company with the smallest downward revision in earnings.

On the 12th, Kwon Sung-ryul of DB Financial Investment stated in a report that although COVID-19 has direct and indirect effects on LG Electronics, the impact appears relatively minor. Researcher Kwon analyzed, “First, the sales proportion in China is minimal, and smartphones, which have been severely affected by the market, are already at an extremely poor level, making further decline unlikely. Moreover, the negative impact is offset by better-than-expected performance in home appliances and TVs.” He added, “As a result, LG Electronics’ pure operating profit is expected to fully meet the current consensus of 791 billion KRW.”

Home appliances are showing stronger-than-expected demand for air solutions such as stylers, air purifiers, and air conditioners due to COVID-19. Researcher Kwon said, “Raw material prices have also dropped significantly, so the Home Appliances & Air Solutions (H&A) division’s operating profit in the first quarter could match the record-high performance of the same period last year.” He continued, “The Home Entertainment (HE) division is expected to perform well compared to the overall TV market situation, with OLED TVs showing slight growth year-on-year and some effects from new models.” Regarding the Mobile Communications (MC) division, he added, “Sales and profits are below expectations due to delayed new model launches, but this seems to be a setback that home appliances can offset.”

It is evaluated as the large IT company with the smallest decline in first-quarter earnings. Researcher Kwon said, “Negative impacts on first-quarter earnings and stock price declines are inevitable for large IT companies due to COVID-19, but there are relative differences within that. LG Electronics, despite being less affected, has seen a stock price decline similar to companies more heavily impacted, which is regrettable.”