[Click eStock] LG Saenggeon 1Q Operating Profit Expected to Drop 30% YoY... "Recovery to Start from 2Q"

COVID-19 Hits Sales in China Local and Duty-Free Stores
Signs of Recovery in Q2... "Growth Possible Through Diversified Business and Brand Loyalty"

[Asia Economy Reporter Minwoo Lee] LG Household & Health Care's operating profit for the first quarter of this year is expected to decrease by nearly 30% compared to the same period last year. This is due to the impact of the novel coronavirus disease (COVID-19), which inevitably affected local demand in China and duty-free shop sales. However, demand through online channels in China remains relatively strong, and since the household goods and beverage business sectors are less affected by COVID-19, it is predicted that performance will recover starting from the second quarter.

On the 10th, Hyundai Motor Securities forecast that LG Household & Health Care will achieve consolidated sales of 1.7861 trillion KRW and operating profit of 226.4 billion KRW in the first quarter of this year. Compared to the same period last year, sales are expected to decrease by 4.7%, and operating profit by 29.7%.

The biggest factor is the decline in sales at local Chinese markets and duty-free shops due to COVID-19. Researcher Hyejin Jung of Hyundai Motor Securities analyzed, "Duty-free shop sales are estimated to have decreased by 30% compared to the previous year," adding, "Local sales in China have a high proportion of offline channels such as department stores, so the temporary closure of stores and shortened operating hours due to COVID-19 are expected to have a significant impact." However, demand through online channels in China is understood to be relatively robust. Logistics issues related to online platforms such as Tmall have been resolved since mid-February, with logistics normalizing over 70%. Additionally, the household goods and beverage business sectors have shown relatively less sales decline due to COVID-19 compared to the cosmetics sector.

There is a forecast for a full-scale performance recovery starting from the second quarter. It is analyzed that signs of recovery in local Chinese demand have already begun to appear. Especially, sales of luxury brands centered on local Chinese and duty-free shop channels are expected to recover rapidly. From the second half of the year, sales of 'Physiogel' are also expected to grow in markets including China, the United States, and Japan.

Accordingly, Hyundai Motor Securities has maintained a 'Buy' investment rating for LG Household & Health Care and kept the target stock price at 1.5 million KRW. The closing price on the previous day was 1.255 million KRW. Researcher Jung explained, "Stable performance recovery is expected in the cosmetics sector, supported by the diversified business structure and the brand power of the company's luxury brand portfolio," and added, "It will continue to hold the position as the most promising stock within the industry."

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