[Click eStock] "LG HelloVision Faces Red Flag in Q1 Earnings Due to COVID-19 Impact... Target Price Down"

[Asia Economy Reporter Eunmo Koo] The novel coronavirus infection (COVID-19) has had a significant impact on the telecommunications industry, leading to concerns over LG HelloVision's first-quarter performance this year.

Hyunyong Kim, a researcher at Ebest Investment & Securities, stated in a report on the 18th that due to the prolonged COVID-19 situation, subscriber numbers, especially for MVNOs (Mobile Virtual Network Operators) and cable services, have not been able to escape a downward trend since this month. This indicates that there have been serious disruptions to sales activities that were initiated immediately after the acquisition by LG Uplus. Kim explained, "In the case of cable, offline visits are sometimes encouraged to respond to subscriber cancellation requests, but such activities have not been possible due to COVID-19," adding, "Besides this, the intensified competition caused by competitors aggressively promoting unlimited LTE plans priced in the 30,000 KRW range has also contributed to the weak subscriber numbers for MVNOs."

The first-quarter operating profit is expected to fall short of market expectations, decreasing by 36.9% year-on-year to 8.2 billion KRW. Kim said, "We have lowered our first-quarter earnings forecast by 25% compared to previous estimates, mainly due to the potential revenue contraction caused by the decline in subscriber numbers." He further noted, "If the subscriber acquisition synergy with LG Uplus is slower than expected, it will be difficult to maintain the existing scenario of subscriber recovery in the first half and revenue rebound in the second half. Additionally, coordination with LG Electronics on the rental business is likely to take longer than anticipated."

Although the investment opinion remains a 'Buy,' the target stock price has been lowered by 33% to 5,000 KRW. Kim explained, "The downward revision of the target price reflects the reality of weaker-than-expected subscriber acquisition, leading us to reduce earnings estimates by more than 30%."

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