[Click eStock] "LG Electronics, Q4 Earnings Expected to Decline Due to Seasonal Factors"

Kiwoom Securities Report
Q4 Operating Profit 601.4 Billion KRW...37% Decrease from Previous Quarter

[Asia Economy Reporter Minji Lee] Kiwoom Securities downgraded LG Electronics from Buy to Outperform on the 12th, considering a profit slowdown in the fourth quarter, while maintaining the target price at 110,000 KRW.

LG Electronics recorded a preliminary operating profit of 959 billion KRW in the third quarter, a 23% increase compared to a year ago. Despite the COVID-19 environment, the recovery in demand for home appliances and TVs led to the highest quarterly performance ever. Ji-san Kim, a researcher at Kiwoom Securities, said, “The competitiveness of premium products has further improved, and the effects of cost and expense reductions were significantly reflected.”

In the home appliance sector, sales of health appliances, refrigerators, and washing machines showed strong performance. By product category, built-in refrigerators, WashTower, and air solutions were strong. Based on the expansion of high value-added product proportions and efforts to reduce costs and optimize expenses, the trend of profitability improvement continued compared to the previous year.

In the TV segment, sales are expected to have increased significantly, supported by strong demand in North America and rising market share. The increase in sales was driven more by the growth in premium products such as ultra-large 65-inch and OLED TVs rather than the rise in LCD panel prices. Researcher Ji-san Kim explained, “With the operation of LG Display’s Guangzhou plant, the expansion of OLED TV sales is being actively carried out, and the 48-inch model made a significant contribution to performance.”

In the smartphone sector, market share in the U.S. increased led by the budget Q and K series. The expansion of ODM also improved the profit structure. Automotive parts are expected to have returned to a high-growth structure with the recovery of finished car demand and the start of new electric vehicle projects, reducing the deficit.

In the fourth quarter, performance is expected to decline somewhat due to seasonal factors. Consolidated operating profit is estimated to have decreased by 37% from the third quarter to 601.4 billion KRW. It is expected to have grown by 491% compared to a year ago. Researcher Ji-san Kim said, “The deficit in automotive parts has significantly decreased, raising expectations for a turnaround next year,” and added, “For TVs, the year-end shopping season sales strategy in a non-face-to-face environment will be mainly online, so promotional intensity will be eased.”

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