[Click eStock] "LG Saenghwal Geongang, 1Q Earnings Below Expectations... Conservative Viewpoint"

Korea Investment & Securities Report

LG Household & Health Care's first-quarter earnings fell short of market expectations, prompting Korea Investment & Securities to maintain a 'neutral' investment rating and recommend a cautious outlook. No target price was provided.

On the 28th, Kim Myung-joo, a researcher at Korea Investment & Securities, stated, "Investment decisions should be made based on whether brand strength recovers alongside a rebound in the Chinese cosmetics market in the second half of the year."

LG Household & Health Care reported consolidated sales of KRW 1.6837 trillion in the first quarter of this year, a 2.4% increase compared to the same period last year, while operating profit decreased by 16.9% to KRW 145.9 billion. The operating profit fell 7.8% short of market expectations (KRW 185.2 billion). The cosmetics business recorded sales of KRW 701.5 billion and operating profit of KRW 61.2 billion.

Researcher Kim explained, "The cosmetics business performed better than concerns suggested, due to improved profitability from reduced marketing expenses in the Chinese market and duty-free channels."

On the other hand, operating profit for household goods remained at KRW 32.7 billion, lower than the expected KRW 55.5 billion, due to rising costs and increased common expenses. Kim pointed out, "The increase in common expenses is expected to continue in the remaining quarters."

Kim analyzed, "It is positive that the cosmetics division's operating profit margin in the first quarter was better than both the market and Korea Investment & Securities' estimates (7.0%). However, this is presumed to be due to the reallocation effect of company-wide common expenses and reduced marketing expenses resulting from lower passenger fees in the duty-free industry."

He added, "It is still premature to conclude that LG Household & Health Care's cosmetics brand strength is recovering. Like its competitors, LG Household & Health Care is undertaking various efforts to restore brand strength. We recommend making investment decisions based on whether brand strength recovers alongside a full-fledged rebound in the Chinese cosmetics market in the second half of the year."

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