[Click eStock] "LG Electronics, Operating Profit Expected to Be Lower Than Anticipated"
IBK Investment & Securities Report
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[Asia Economy Reporter Minji Lee] IBK Investment & Securities maintained a buy rating and a target price of 190,000 KRW for LG Electronics, stating that although the profit forecast for the first quarter is lowered, there is still room for stock price appreciation.
On the 26th, IBK Investment & Securities projected LG Electronics' first-quarter sales to increase by 17.4% year-on-year to 15.096 trillion KRW. This is slightly lower than the previous forecast. Operating profit is expected to be 768.1 billion KRW, which is 1.4 times higher than the fourth quarter of last year but 19.3% lower than the first quarter of last year.
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Researcher Kim Unho of IBK Investment & Securities explained, “Sales will increase year-on-year in all business divisions except the MC (Mobile Communications) division, but operating profit will decline in all divisions except the VS (Vehicle Components) division.”
The current stock price is analyzed to reflect expectations for the JV with Magna and performance improvement from the closure of the MC division. Profitability from the JV is expected to materialize in earnest after three years, and it will be properly evaluated once sales reach 1 trillion KRW. The MC division can quickly escape from nearly 1 trillion KRW in annual operating losses just by withdrawing from the business, so its contribution to performance improvement is considered both rapid and significant.
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Researcher Kim Unho said, “As we enter the peak season for home appliances, H&A (Home Appliance & Air Solution) is expected to exceed 2 trillion KRW in annual operating profit, showing the strongest performance improvement momentum within the IT sector.” He added, “The HE (Home Entertainment) division’s operating profit is also approaching 1 trillion KRW, and total operating profit is expected to exceed 2 trillion KRW.” He further noted, “There remains additional upside potential for the stock price depending on the direction of the MC division.”
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