[Click eStock] LG Electronics Stabilizing the Bottom... "Further Price Drop Unlikely, Strong Upward Momentum"

[Image source=Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] DB Investment & Securities maintained its investment opinion of 'Buy' and target price of 180,000 KRW for LG Electronics on the 9th.

DB Investment & Securities forecasted LG Electronics' operating profit for the second quarter of this year to be 662.8 billion KRW, which is a 10.5% decrease compared to the same period last year. Considering that the consensus for the second quarter operating profit before the first quarter earnings announcement was 897 billion KRW, this is somewhat disappointing, but the performance appears to be gradually bottoming out.

By business division, H&A (Home Appliance & Air Solution) continues to face burdens from logistics and raw material costs, but sales showed double-digit growth in the second quarter due to a strong North American market, indicating steady demand. HE (Home Entertainment) saw no significant change in shipment volume due to the stagnant TV market, but the proportion of OLED TVs continues to increase. VS (Vehicle component Solutions) is expected to turn slightly profitable in the second quarter due to increased shipment volume and improved product mix. BS (Business Solutions) is expected to see improved profit margins as sales increase mainly in IT devices after excluding the solar power business.

Changes in the B2B business are also positive. The VS division is expected to exceed 2 trillion KRW in sales and maintain a profitable trend from the second quarter, as the proportion of EPT parts increases and high-quality orders secured since 2018 grow. It is estimated that EPT parts, which have good profitability based on order backlog, have increased to nearly 20% of the proportion. BS is expected to see flexible improvement in profit margins after withdrawing from the solar power business, with significant sales growth in ID and continued high-value sales in IT devices despite the disappearance of COVID-19-related demand. The BS division, which recorded losses in the second half of last year, is expected to achieve stable profitability in the mid-single-digit range or higher going forward.

Kwon Seong-ryul, a researcher at DB Investment & Securities, said, "The poor performance due to B2C seems to have already been reflected in the fallen stock price," adding, "The B2B stock momentum has not yet been reflected, and with the upcoming profit turnaround and margin improvement, the stock price is capped below but has much room to rise above, so I recommend buying."

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