[Click eStock] LG, Growth Over Words... Target Price Downgraded

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[Asia Economy Reporter Junho Hwang] Hi Investment & Securities lowered the target price to 106,000 KRW on the 15th, citing LG's sluggish new investments as the reason.

LG completed a spin-off in May last year and announced plans to invest in new areas using its cash holdings. At that time, LG transferred its five major subsidiaries to the newly established company LX Holdings, and through stock exchanges and disposals between major shareholders and LX Holdings, effectively completed the separation of affiliates. LG justified the spin-off and affiliate separation by citing corporate value and shareholder profit enhancement, efficient capital allocation, and active shareholder returns. Additionally, from the perspective of efficient capital allocation, LG stated it would invest in high-growth sectors within the same industry and maximize growth through new business investments or mergers and acquisitions (M&A).

However, LG has not made any significant investments since then. The only investment was 100 billion KRW in Kakao Mobility in July last year. Lee Sangheon, a researcher at Hi Investment & Securities, evaluated, "LG's rationale for the spin-off is fading as no further new business investments are being made," and added, "LG's unique growth momentum has stalled, and only time is passing." He further explained, "Reflecting the decline in the stock prices of major subsidiaries, the target price was lowered, and for subsidiary valuation, the target price was calculated by applying a 30% discount rate to the net asset value (NAV), which was derived using the average market price for listed companies and book value for unlisted companies."

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