[Click eStock] "LG Electronics, Burdensome Logistics and Raw Material Costs"

Expecting Momentum Based on Premium Product Competitiveness in the First Half of Next Year
Kiwoom Securities "Maintains LG Electronics Target Price at 180,000 KRW"

[Asia Economy Reporter Gong Byung-sun] LG Electronics' fourth-quarter earnings this year are expected to fall short of market consensus due to costs. However, if cost factors ease, earnings growth momentum based on premium product competitiveness is anticipated in the first half of next year.

On the 14th, Kiwoom Securities estimated LG Electronics' operating profit for Q4 to be 777.6 billion KRW, down 10% year-on-year. This is 8.31% below the consensus. Additionally, the separate operating profit estimate excluding LG Innotek was revised downward from 487 billion KRW to 302.8 billion KRW.

Cost issues are expected to impact LG Electronics' Q4 performance. Cost increases such as logistics and raw material prices, mainly in home appliances, are having a greater effect than expected. The automotive parts division is also continuing its deficit trend due to prolonged vehicle semiconductor supply issues.

The TV division is in a relatively positive situation regarding costs as panel prices have declined. Nevertheless, the special demand for home entertainment has disappeared, and year-end peak season demand is weak due to price increases triggered by panel prices.

However, Kiwoom Securities analyzes that earnings momentum will emerge from the first half of next year. If production disruptions and cost factors are resolved, premium product competitiveness could be highlighted.

The home appliance division is counting on demand from the United States. Ji-san Kim, a researcher at Kiwoom Securities, said, "The logic that the replacement cycle in the U.S. has arrived is gaining strength," adding, "All demand bases such as housing, replacement, and discretionary purchases are strong, and since U.S. demand was good from 2011 to 2015, positive demand is expected from this year through 2025."

The automotive division is expected to return to profitability if the vehicle semiconductor issue is resolved. Considering the quality of orders and sales leverage, internal competitiveness is evaluated to have improved. The order backlog is also estimated to exceed 60 trillion KRW by the end of this year. Although premium competition will intensify in the TV division due to panel price declines, LG Electronics plans to expand its organic light-emitting diode (OLED) TV lineup to seize leadership.

Accordingly, Kiwoom Securities maintained its investment opinion of "Buy" on LG Electronics with a target price of 180,000 KRW. The closing price on the previous day was 134,000 KRW.

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