[Click eStock] "Significantly Undervalued LG Household & Health Care, Reaching 2 Million Won"

Strong Demand for Household Goods and Beverages with Cosmetic Industry Recovery Hopes
Physiogel and New Avon Acquisition Effects to Fully Materialize Next Year

[Asia Economy Reporter Minwoo Lee] An analysis has emerged that LG Household & Health Care's current stock price is significantly undervalued compared to global peers. With profitability in the household goods and beverage sectors clearly improved, full-scale earnings growth is expected once the cosmetics market recovers.

On the 21st, NH Investment & Securities maintained a 'Buy' rating on LG Household & Health Care and raised the target price by 8% to 2 million KRW. The previous trading day's closing price was 1,611,000 KRW. Despite continued operating profit growth amid the COVID-19 pandemic, the stock is considerably undervalued at a discount of more than 30% compared to domestic and international peers. It is analyzed that a corporate revaluation is necessary through improved performance by business divisions and high brand value.

Earnings growth is expected to accelerate next year. First, the acquisition effects of Europe's leading derma-cosmetics brand 'Physiogel' and the U.S. cosmetics company 'New Avon' are anticipated to fully materialize. Mi-jin Cho, a researcher at NH Investment & Securities, explained, "This will reduce the high dependence on the 'Whoo' brand and the Chinese market, enabling the establishment of new growth drivers." Since the third quarter, New Avon has reached its operating profit break-even point (BEP) through restructuring and changes in sales channels. Physiogel products also began sales in the U.S. market from the fourth quarter. Next year, sales growth in the U.S. region through LG Household & Health Care products is expected to become visible.

Immediate fourth-quarter earnings are also projected to be solid. NH Investment & Securities forecasts LG Household & Health Care to achieve consolidated sales of 2.0851 trillion KRW and operating profit of 261.6 billion KRW in the fourth quarter of this year. These figures represent increases of 3.6% and 8.5%, respectively, compared to the same period last year. The cosmetics segment is estimated to maintain last year's performance with local Chinese and duty-free store sales increasing approximately 25% and 3%, respectively, year-on-year. Researcher Cho stated, "Household goods will see a significant rise in operating profit due to the acquisition effect of Physiogel, an increase in high-margin online sales, and an expanded proportion of premium products." She added, "Although the beverage sector is in its seasonal off-peak, operating profit is expected to increase by 14.5% year-on-year due to rising delivery demand and sales growth centered on core brands."

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