[Click eStock] "LG Electronics, Rising Expectations for Automotive Components Business"

[Asia Economy Reporter Song Hwajeong] KB Securities maintained its 'Buy' rating and a target price of 220,000 KRW for LG Electronics on the 31st, anticipating an expansion in its automotive components business.

Dongwon Kim, a researcher at KB Securities, stated, "With the increased possibility of Magna's contract manufacturing for Apple Car, the business expansion of 'LG Magna e-Powertrain,' a joint venture between LG Electronics and Magna for electric vehicle parts, is expected. Additionally, uncertainties regarding continued losses from the MC (smartphone) business restructuring in the first half of this year are being resolved, and a first-quarter earnings surprise is anticipated, which will alleviate concerns about performance."

On the previous day, LG Electronics' stock price rose over 8% due to expectations surrounding the Apple Car. This surge was driven by recent remarks from Magna's CEO indicating readiness for Apple Car production. Swami Kotagiri, CEO of Magna, recently stated at an automotive analysts' association event that if investments according to the contract are guaranteed, they are prepared to produce the Apple Car through new expansions of their North American factories. Magna is the number one automotive parts supplier in North America and ranks third globally. Researcher Kim noted, "It is important to pay attention to the fact that Magna's CEO, who currently directly manufactures vehicles for Mercedes-Benz, BMW, and Toyota, mentioned Apple Car production publicly for the first time." He analyzed, "The reason Magna's CEO expressed confidence in Apple Car production is that through LG Electronics and their joint venture LG Magna e-Powertrain, they can supply motors and inverters that serve as the electric vehicle engine."

LG Electronics is expected to report an earnings surprise in the first quarter. KB Securities forecasts LG Electronics' first-quarter operating profit to increase by 130% compared to the previous quarter, reaching 1.5 trillion KRW, surpassing market consensus estimates by 27%. Researcher Kim explained, "Following COVID-19 vaccinations, pent-up demand has concentrated on high-end premium home appliances and extra-large TVs, leading to expected improvements in the home appliance and TV divisions' performance."

LG Electronics' stock price has fallen 17.8% from its January peak due to increased uncertainty over the MC business. Researcher Kim stated, "Although excessive concerns have been reflected in the stock price decline, the successful business structure transition centered on automotive components will lead to a mid- to long-term stock price revaluation, and a rapid stock price recovery is expected in the future."

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