[Click eStock] "LG Electronics, Improving Profitability... Target Price Up"

Hyundai Motor Securities analyzed on the 3rd that LG Electronics' logistics costs, which had abnormally surged due to COVID-19, are normalizing, leading to profitability returning to normal levels. Accordingly, they maintained a 'Buy' investment rating and raised the target stock price to 140,000 KRW.

No Geun-chang, a researcher at Hyundai Motor Securities, stated, "The consolidated operating profit for the first quarter is expected to reach 1.3 trillion KRW, driven by profitability improvements in the H&A (Home Appliances & Air Conditioning) and HE (Home Entertainment) divisions, making it the most notable first-quarter performance among electronics companies." This is because transportation contracts are made annually, and based on the contract at the end of December, annual logistics costs are estimated to drop significantly.

However, TV demand remains sluggish, and home appliance demand is also affected by the economic downturn, so sales excluding LG Innotek are expected to decrease by 3.0% compared to the previous year.

The operating profit margin of the H&A division in the first quarter is expected to improve to 11.4%, as shipments of the three products?refrigerators, washing machines, and air conditioners?are all estimated to improve compared to the previous quarter.

The HE division's operating profit margin is forecasted to be 4.6%. Although TV shipments remain weak, the Eurozone, where OLED TVs had been strong, has recently shown signs of recovery, and marketing expenses have also decreased.

Researcher No said, "In the first quarter, the BS (Business Solutions) division will also turn profitable, so all divisions will record profits," and added, "The strategy to buy or hold stocks will be valid through the second quarter."

The growth driver, VS (Vehicle Solutions), currently has a backlog of 80 trillion KRW (orders received but not yet delivered to customers), and sales are expected to increase each quarter.

Although LG Electronics is an export company, it is a finished product company, and the proportion of sales in the Korean market is as high as 39.9% (2022), making the weak Korean won disadvantageous. Major raw materials are paid for in dollars, but sales are made in various regions led by Korea.

Researcher No evaluated, "From a profitability perspective, the Korean won has strengthened compared to 2022, which is positive," and added, "Profitability will also improve from the point when the sales proportion of LG Magna increases."

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