LG Electronics Expects Strong Q1 Performance Despite COVID-19

[Asia Economy Reporter Kum Bo-ryeong] Despite the novel coronavirus infection (COVID-19), LG Electronics' first-quarter performance is expected to be relatively strong.

According to Hanwha Investment & Securities on the 15th, LG Electronics' first-quarter earnings this year are estimated at KRW 15.7 trillion in sales and KRW 893 billion in operating profit.

Junhwan Kim, a researcher at Hanwha Investment & Securities, stated, "Despite the unstable domestic and international environment, we expect operating profit to exceed the consensus by about 6.7%. HE (TV) is expected to show better-than-expected profitability despite rising panel prices due to production disruptions and reduced marketing expenses among Chinese competing TV manufacturers." He added, "In home appliances, the recent increase in health management needs due to COVID-19 has highlighted the performance of new growth appliance product lines. In fact, Tromm Styler sales in February increased by more than 30% compared to the same period last year. The H&A (home appliances) division, which will be a solid pillar of the company's overall performance, is expected to maintain high profitability of around 12% in the first quarter. On the other hand, MC (smartphones) shows no significant improvement but is in line with expectations."

Researcher Kim emphasized that although there are concerns about global IT demand due to COVID-19, LG Electronics' earnings stability is higher compared to other IT sectors. This is because the current easing of TV competition is expected to continue into the second quarter, and home appliances continue to grow domestically and overseas. The combined operating profit consensus for major domestic IT companies in the first quarter fell by 6.4% from the early-year peak, leading to an average stock price decline of 11.3%. Kim said, "Considering that LG Electronics' first-quarter operating profit is expected to be higher than consensus, the 23% stock price decline is excessive."

Hanwha Investment & Securities maintained LG Electronics' target stock price at KRW 85,000. Researcher Kim analyzed, "Although momentum from business structural improvements is lacking, the stock price already reflects concerns about the global recession, making a bottom-fishing strategy valid."

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