[Click eStock] "LG Electronics, Changes in MC Division Operations... Active Buying Opportunity"
Korea Investment & Securities Report
Target Price Raised by 22%
[Asia Economy Reporter Minji Lee] Korea Investment & Securities advised on the 21st that an active purchase of LG Electronics is necessary. This is based on the judgment that the company's value could improve due to a change in the company's stance on the MC (smartphone) business division, which had been operating at a loss. Accordingly, the target stock price was raised by 22% from the previous level to 220,000 KRW.
![[Click eStock] "LG Electronics, Changes in MC Division Operations... Active Buying Opportunity"](http://www.asiae.co.kr/news/img_view.htm?img=2020041607483578758_1586990915.jpg)
On the previous day, LG Electronics CEO Kwon Bong-seok stated in an email sent to the MC division that all possibilities are being considered regarding the MC division's business operation direction. This is interpreted to mean withdrawal, sale, or downsizing.
The MC division has recorded operating losses for 23 consecutive quarters since the second quarter of 2015. Although the estimated sales of the MC division last year were 5.2 trillion KRW, accounting for only 8.3% of consolidated sales, the operating loss of 838 billion KRW significantly impacts the company's overall operating profit (3.2 trillion KRW).
Despite relocating the smartphone production base to Vietnam over the past two years and expanding the ODM ratio to 60% last year, performance improvement has been elusive. Researcher Choi Cheol-hee of Korea Investment & Securities said, “The email stated that employment will be maintained, and it is expected that the development of communication-related technologies (home appliance IoT, automotive electronics) handled by MC will continue through retaining R&D personnel, so there will likely be no impact on other business divisions.”
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Researcher Cho added, “If the operating value of the MC division, which had been incurring large losses, is revised from the previous 5 trillion KRW loss to zero, the factor discounting valuation compared to competitors will rapidly disappear.”
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