[Click eStock] "LG Electronics, BS Division Faces Weak Outlook... Target Price Down 9%"

Kiwoom Securities Report

[Asia Economy Reporter Minji Lee] Kiwoom Securities maintained a buy rating on LG Electronics on the 13th and set a target price of 200,000 KRW, which is 9% lower than the previous target. This is based on the judgment that the Business Solutions (BS) division and the automotive parts sector will continue to underperform in the third quarter.

LG Electronics' operating profit for the third quarter is estimated to increase by 3% year-on-year to 1.1025 trillion KRW. However, on a separate basis, operating profit is expected to decline by 18% year-on-year to 809.5 billion KRW due to the poor performance of the Business Solutions division.

The home appliances segment is performing well, centered on premium overseas markets such as North America. Third-quarter sales are expected to be unusually higher than those of the second quarter, as the expansion of B2B businesses like commercial air conditioners is expected to overcome seasonality. In Europe, strong growth is anticipated to continue, led by new appliances such as dryers.

The TV segment is expected to maintain a superior profitability trend compared to competitors, supported by strong OLED sales despite cost pressures from panels and DDICs. This is because signs of price increases led by leading companies are becoming concrete.

The automotive parts sector’s turnaround to profitability is expected to be delayed until the fourth quarter due to prolonged production disruptions at OEMs. Whether additional provisions related to the GM Bolt recall will be set is expected to determine the division’s future performance.

The profitability of Business Solutions is expected to remain weak, as the solar segment faces difficulties generating profits due to rising costs of wafers and intensified price competition, and the information display segment is presumed to have delayed business normalization due to the resurgence of COVID-19.

Factors that could affect the stock price going forward include the automotive parts division’s return to profitability, expectations related to the Apple Car, and the easing of profitability pressures from raw materials, panels, semiconductors, and logistics costs. Researcher Jisan Kim stated, “Home appliances are expected to continue strong premium demand in advanced markets, and TV panel price burdens are expected to ease while the industry’s price increase effects will be reflected. OLED TV sales are projected to reach 4 million units this year, marking the first year of popularization.”

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