[Click eStock] "LG Electronics, Structural Profitability Expected in Auto Parts"

[Image source=Yonhap News]

[Asia Economy Reporter Hwang Yoon-joo] Kiwoom Securities maintained its 'Buy' rating and target price of 180,000 KRW for LG Electronics on the 8th, confirming an early turnaround to profitability in the automotive parts segment in the preliminary Q1 earnings.

Kim Ji-san, a researcher at Kiwoom Securities, stated, "The preliminary operating profit for Q1 was 1.8801 trillion KRW (QoQ 177%, YoY 6%), exceeding market consensus (1.3559 trillion KRW)."

Researcher Kim noted, "Although there were large one-time costs for personnel restructuring, these were more than offset by significantly higher patent license revenues."

He gave a qualitative positive assessment of the Q1 results, explaining, "Automotive parts finally achieved a substantial turnaround to profitability, home appliances demonstrated inflation resilience based on premium competitiveness, and the company's patent strength and patent value proved formidable."

He particularly pointed out that the stock price excessively reflected inflation concerns exacerbated by the Ukraine crisis.

Researcher Kim emphasized, "I reiterate the importance of focusing on the structural improvement of automotive parts," analyzing, "The expansion of the high-profit infotainment (entertainment + information) project is improving the product mix, and the diversification of customers for electric vehicle powertrains is supporting this progress."

He estimated, "Sales in the off-season Q1 increased by 12% QoQ, and as the supply issues of automotive semiconductors gradually ease, the company will settle into a structural profit trend."

He added, "Operating profit for Q2 is expected to be 1.1746 trillion KRW (QoQ -38%, YoY 34%), with the profit growth rate compared to the same period last year expanding," and noted, "The profit and loss structure will improve due to personnel restructuring and the discontinuation of the solar power business."

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