[Click eStock] "LG Electronics Q2 Expected Weakness Excluding Auto Parts... Target Price Down"

[Asia Economy Reporter Myunghwan Lee] Daishin Securities announced on the 29th that it maintains a buy rating on LG Electronics but lowers the target price by 8.3% from the previous 180,000 KRW to 165,000 KRW, citing expected earnings slowdown in the second quarter of this year.

The company's consolidated operating profit for the first quarter of this year increased by 6.4% year-on-year to 1.88 trillion KRW, surpassing the market forecast of 1.36 trillion KRW. Sales also rose 18.5% year-on-year to 21.1 trillion KRW, exceeding the forecast of 19.9 trillion KRW. Daishin Securities analyzed that the high operating profit reflected personnel efficiency costs and a one-time gain estimated at about 850 billion KRW from patent income.

By segment, the H&A (Home Appliances) operating profit margin recorded 5.6% due to the reflection of personnel efficiency costs. Although rising raw material prices posed a burden, this was partially offset by an increase in the premium product ratio, higher average selling prices, and sales growth. The HE (TV) segment's operating profit margin of 4.6% was lower than market expectations due to weakened global TV demand and increased marketing expenses. The VS (Vehicle Components) segment posted a slight operating loss of 6.3 billion KRW but achieved sales of 1.88 trillion KRW. The improvement in the mix of LG Magna (motors) and ZKW (lamps) led to better profitability compared to the previous year, resulting in better-than-expected performance, which was positively evaluated.

Daishin Securities estimates LG Electronics' consolidated operating profit for the second quarter of this year to be 810.2 billion KRW, down 7.7% year-on-year and below market expectations. It is expected that cost burdens will increase company-wide in the second quarter. H&A (Home Appliances) sales are expected to increase by 19.1% year-on-year due to strong sales of premium and new appliances, but the operating profit margin is forecast to decline to 5.1% due to rising raw material prices and increased logistics costs. The TV (HE) operating profit margin is estimated to fall to 2.8% from the previous quarter due to intensified market competition, sales slowdown, and increased marketing expenses. However, the VS (Vehicle Components) segment is expected to return to operating profit due to increased sales and mix improvement.

Researcher Kangho Park of Daishin Securities said, "Profitability in the second half of this year is expected to improve compared to the first half through new product price pass-through of major cost increases and cost efficiency," adding, "Operating profit is expected to improve year-on-year in the third and fourth quarters, with the second quarter as the bottom."

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