[Click eStock] "LG Electronics, Expecting Turnaround in Automotive Division Next Year... Target Price ↓"

[Asia Economy Reporter Myunghwan Lee] KB Securities announced on the 19th that it maintains a buy rating on LG Electronics but lowers the target price from the previous 130,000 KRW to 120,000 KRW. This adjustment reflects anticipated equity method losses due to a decline in TV shipments in the home appliance sector and poor performance expected from LG Display. However, the automotive components division is expected to record a turnaround in earnings next year.

KB Securities forecasts LG Electronics' consolidated third-quarter sales (including LG Innotek) to increase by 8.2% year-on-year to 20.1 trillion KRW, with operating profit growing 41.4% to 844.1 billion KRW. These figures align with market expectations.

By business segment, the H&A (Home Appliance & Air Solution) division is expected to continue sales growth driven by an increased share of premium products, while the VS (Vehicle Components) sales are projected to grow 37% year-on-year, maintaining a profit trend of around 50 billion KRW following the second quarter. Estimated third-quarter operating profits by segment are ▲H&A 344.1 billion KRW ▲VS 48.5 billion KRW ▲BS (Business Solutions) 27.3 billion KRW ▲HE (Home Entertainment) 5.4 billion KRW.

KB Securities anticipates that LG Electronics' automotive component affiliates will simultaneously achieve earnings turnarounds next year. In the first half of this year, LG Electronics secured new VS orders worth 8 trillion KRW. Accordingly, KB Securities expects LG Electronics to comfortably reach a VS order backlog of 67 trillion KRW this year. The order composition by segment is estimated as infotainment (60%), ZKW (20%), and LG Magna e-Powertrain (20%).

They also analyzed a high likelihood of sustained profitability in LG Electronics' automotive components business, citing structural sales growth that has enabled quarterly average sales exceeding 2.2 trillion KRW since the second quarter.

KB Securities' analysis highlights expectations for simultaneous earnings turnarounds starting next year among LG Group's automotive affiliates, including LG Electronics, LG Magna, ZKW, and LG Innotek. The total order backlog for LG Electronics' automotive affiliates is projected to reach 79 trillion KRW by the end of this year, indicating future structural sales growth. The recent establishment of a new factory in Mexico, expected to secure new customers in the North American market, is also viewed positively.

Researcher Dongwon Kim of KB Securities stated, "The automotive components business, which achieved a turnaround to profitability for the first time in nine years in the second quarter, is expected to maintain its profit trend in the third quarter, signaling long-term diversification of profit structure into the business-to-business (B2B) sector."

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