[Click e-Stock] "LG Electronics, Earnings Already Like Spring... Stock Price Like Chunlaebulsachun"

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[Asia Economy Reporter Kwon Jae-hee] DB Financial Investment maintained a 'Buy' rating on LG Electronics on the 23rd, setting a target price of 180,000 KRW.

Despite concerns about LG Electronics' earnings, demand for its core products has not significantly declined, and the company has developed resilience against cost pressures, leading to expectations that the first-quarter earnings will meet market forecasts.

LG Electronics' first-quarter earnings forecast is 1.057 trillion KRW, similar to DB Financial Investment's estimate of 1.038 trillion KRW. The H&A (Home Appliance & Air Solution) and HE (Home Entertainment) divisions are expected to achieve over 10% sales growth compared to the same period last year, indicating steady demand. H&A continues to see strong premium and replacement demand in the North American market, while HE is expected to improve product mix and average selling price (ASP) with the launch of new TV models from 2022 between March and May.

The key to second-half performance lies in the B2B business. The Vehicle Solutions (VS) division has seen a reduction in the sales proportion of low-priced orders, and cost improvement efforts to lower the break-even point (BEP) are taking hold. Although sales have not fully recovered, losses are decreasing faster than expected. Consequently, the timing of turning profitable could be accelerated, and if sales exceed 2 trillion KRW, profit elasticity is expected to increase significantly.

The Business Solutions (BS) division, which was the main cause of performance deterioration due to the solar panel business, has ended that segment and is focusing on ID (Information Display) and IT products. After reflecting losses from discontinued operations in the second quarter, it is expected to transform into a strong business division in the second half of the year.

Kwon Seong-ryul, a researcher at DB Financial Investment, analyzed, "Earnings are in spring, but the stock price has not yet reflected this," adding, "If first-quarter earnings are better than concerns and the B2B business supports growth, the stock price will also gain strength."

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