[Click eStock] "LG Electronics Forecasts Best Performance in 12 Years"

KB Securities Report

The LG Twin Towers in Yeouido, Seoul, where LG Electronics' headquarters is located, on the 2nd, as LG Electronics' exit from the smartphone business is imminent. Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Minji Lee] KB Securities maintained a buy rating and a target price of 220,000 KRW for LG Electronics on the 6th. This is based on the expectation that the quarterly operating loss of 300 to 400 billion KRW caused by the suspension of the Mobile Communications (MC) division from the second quarter will disappear, accelerating earnings improvement.

LG Electronics' first-quarter operating profit is estimated at 1.5 trillion KRW, a 130% increase compared to the previous quarter. This is an earnings surprise that breaks the record set in the second quarter of 2009 (operating profit of 1.2 trillion KRW) for the first time in 12 years. Dongwon Kim, a researcher at KB Securities, said, "This is because consumer trends in North America and Europe are focused on high-end premium home appliances and large-sized TV revenge consumption," adding, "Considering the effect of the MC business suspension, the second-quarter operating profit is expected to significantly increase compared to last year (494.5 billion KRW) and exceed 1 trillion KRW."

Aside from the MC business suspension, the possibility of selling the MC business is also open, which is expected to bring additional cash inflows. Accordingly, LG Electronics' net profit for this year is expected to reach 3 trillion KRW, and even considering the one-time costs due to the MC business suspension, the increase in operating profit is expected to be greater.

Despite the announcement of the MC business withdrawal, LG Electronics' stock price fell about 2.5% the previous day due to concerns over costs related to the MC business suspension. However, the Vietnam mobile phone production process is expected to be utilized by the home appliance and TV divisions, so the possibility of cost occurrence is low. Regarding MC personnel, demand from LG Group's automotive parts affiliates is larger than expected, which is expected to reduce fixed cost burdens through affiliate reassignment. Additionally, patents held by the MC division are anticipated to be used as opportunities for future revenue generation.

Researcher Dongwon Kim explained, "From the second half of this year, LG Electronics is expected to establish a profit trend across all business divisions for the first time in six years since the second quarter of 2015, along with a turnaround to profitability in the automotive parts division."

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