[Click eStock] “LG Electronics, GM Bolt Recall Uncertainty Resolved Starting Q3”

Increase in Sales and Economies of Scale in the Semiconductor Sector
Daishin Securities "Maintains LG Electronics Target Price at 210,000 KRW"

[Asia Economy Reporter Gong Byung-sun] LG Electronics' third-quarter earnings this year fell significantly short of market expectations (consensus). However, excluding costs related to the recall of GM's Bolt electric vehicle (EV), the performance appears better than initially feared. With the uncertainty surrounding the GM Bolt expected to be resolved starting from the third quarter, a return to profitability in the automotive components business is anticipated in the fourth quarter.

According to Daishin Securities on the 13th, LG Electronics posted third-quarter sales of KRW 18.7845 trillion, a 22% increase compared to the same period last year, while operating profit fell 49.6% to KRW 5.407 billion. The operating profit was significantly below the consensus estimate of KRW 11.239 trillion due to a provision of KRW 480 billion related to the GM Bolt EV recall.

However, excluding the recall cost of KRW 1.0207 trillion, the overall results are interpreted to be in line with estimates. Sales also reached a quarterly record high when reflecting the discontinuation of the mobile phone (MC) business at the end of July. Park Kang-ho, a researcher at Daishin Securities, explained, “We demonstrated high growth in scale due to the expansion of premium sales and increased market share.”

(Provided by Daishin Securities)

From the fourth quarter, the automotive components division, which included the GM Bolt EV recall costs, is expected to return to profitability. The operating profit margin for the automotive components division in the third quarter was estimated at -30.2% due to the recall costs. However, the uncertainty related to the GM Bolt EV appears to be resolved as of the third quarter.

Researcher Park said, “The automotive components division is entering a phase of sales growth and economies of scale,” adding, “Sales in the automotive components division are expected to reach KRW 1.9 trillion in the fourth quarter, with operating profit turning positive.” Daishin Securities estimates that LG Electronics' overall sales and operating profit next year will increase by 3.9% and 24.5%, respectively, supported by improved performance in the automotive components division.

Accordingly, Daishin Securities maintained its investment opinion of ‘Buy’ on LG Electronics with a target price of KRW 210,000. The closing price on the previous day was KRW 124,000.

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