[Click eStock] "LG Electronics, B2B Business Improvement Expected Despite 2Q Earnings Slump"

[Asia Economy Reporter Lee Jung-yoon] KB Securities maintained its buy rating and target price of 160,000 KRW for LG Electronics on the 13th.

LG Electronics is expected to see weak performance in its HE (TV) division this year due to decreased consumer spending on B2C (business-to-consumer) products caused by factors such as China's lockdowns, rising inflation, and the Ukraine crisis. However, the B2B (business-to-business) segments, including the automotive components (VS) and BS (Business Solution) divisions, are anticipated to show improving performance trends. The automotive components division is expected to return to profitability due to order stabilization efforts initiated since 2019, and the BS division is also expected to see significant profitability improvements following the discontinuation of its solar module business and an improved product mix focused on high value-added products.

LG Electronics' second-quarter performance this year is projected to be somewhat weak due to declining profitability in the home appliances (H&A) and TV businesses. On a consolidated basis, second-quarter sales are expected to increase by 16.6% year-on-year to 20 trillion KRW, while operating profit is forecasted to decrease by 2.1% to 859.7 billion KRW. The decline in profitability in the home appliances and TV businesses is likely to result in slightly weaker results compared to market consensus estimates. Operating profit by division for the second quarter is estimated at 462.2 billion KRW for home appliances, 110.7 billion KRW for TV, 2.2 billion KRW for automotive components, and 83.4 billion KRW for BS.

Researcher Kim Dong-won of KB Securities explained, "Despite weak B2C demand this year, LG Electronics' profitability is expected to improve due to expanded market share in North America for the home appliances business and strong performance in the B2B automotive components and BS divisions. The automotive components division is expected to achieve quarterly sales exceeding 2 trillion KRW starting from the second quarter, laying the foundation to maintain a profit-making trend."

He added, "Sales in the automotive components business are expected to increase by 20.4% and 18.3% year-on-year to 8.7 trillion KRW and 10.2 trillion KRW in 2022 and 2023, respectively, with operating profits estimated to rise by 12.5 billion KRW and 143.4 billion KRW year-on-year. Due to sales growth in all divisions except TV this year, total sales are expected to reach 82.6 trillion KRW with operating profit of 4.7 trillion KRW."

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