[Click eStock] "LG Electronics, Focus on Next Year's Q1 Performance Over Q4"

Daishin Securities Report
Target Price Down 9%

[Asia Economy Reporter Minji Lee] Daishin Securities maintained a buy rating on LG Electronics on the 15th and set a target price of 190,000 KRW, down 9% from the previous target. Although the target price was lowered considering the earnings expected to be lower than anticipated in the fourth quarter, it is predicted that earnings will show an improvement in the first quarter of next year.

According to Daishin Securities, operating profit in the fourth quarter is expected to decrease by 6.7% compared to the same period last year, reaching 805 billion KRW. Sales are estimated to decline by about 15.8% to 20.15 trillion KRW. Operating profit is forecasted to fall short of the market expectation of 836.5 billion KRW.

However, operating profit in the first quarter of next year is estimated at 1.64 trillion KRW, reflecting the peak season and the effects of new product launches and mix in the Home Appliance (H&A) and TV (HE) divisions. Kangho Park, a researcher at Daishin Securities, stated, “This month, the stock price is expected to focus more on the profit increase in the first quarter of next year and business changes next year rather than the fourth quarter earnings of this year.” He added, “Considering the turnaround expectations in the Vehicle Solutions (VS) business, the company’s price-to-earnings ratio (PER) next year is an attractive level at 7.1 times.”

The key investment point to watch in the first quarter is the expected increase in sales and market expansion of OLED TVs, which are in the premium segment of TVs next year, potentially bringing LG Electronics a positive spillover effect and additional profit upgrades. This expectation arises as Samsung Electronics plans to enter the QD-OLED TV market in the first quarter of next year, and Chinese TV manufacturers are choosing OLED for their premium TVs, leading to an expansion of the OLED TV market. LG Electronics, which holds the number one market share in OLED TVs, is expected to see additional increases in sales and operating profit through an increased proportion of OLED TVs within its TV business, with OLED TV sales projected to reach 4.94 million units, a 31.7% increase compared to the same period last year.

In the first half of next year, the home appliance business segment is expected to continue benefiting from new product launches, expansion of new and premium products, and mix effects. The burden of rising raw material prices this year is predicted to be offset by new product launches next year. Researcher Park said, “Since the domestic sales proportion, which has a favorable margin, is high, additional profitability improvements are expected in the H&A division.” He also analyzed, “In the vehicle solutions division, the supply shortage of semiconductor parts is gradually being resolved, and the full reflection of orders will be reflected in sales.” Park added, “Regarding Apple’s entry into the electric vehicle market, this can be interpreted as a positive issue for LG Electronics.”

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