[Click eStock] "LG Saenghwal Geongang, Recovery of Chinese Market is Key"

Kiwoom Securities Report

Kiwoom Securities maintained a buy rating and a target price of 800,000 KRW for LG Household & Health Care on the 23rd. This is based on the judgment that it will take more time for the Chinese market to return to normal.

The company's sales in the second quarter are estimated to have grown by 1% year-on-year to 1.8844 trillion KRW. Operating profit is analyzed to have decreased by 14% to 186.2 billion KRW during the same period. This is due to limited sales growth caused by delayed recovery in the China-bound channels and significant cost burdens.

The cosmetics segment targeting China is showing a slower-than-expected recovery trend. Duty-free sales are expected to have decreased by 27%, while sales from the Chinese subsidiary are projected to have grown by more than 12%. Sojeong Cho, a researcher at Kiwoom Securities, said, “The duty-free market is recovering due to an increase in individual travelers, but the company’s exposure to daigou and group travelers is relatively high, so the benefit is limited,” adding, “The Chinese local subsidiary had a very low base last year, so it is expected to have recorded double-digit growth.”

The beverage division’s cost burden is also expected to continue in the second quarter. This is because profitability is anticipated to shrink compared to a year ago due to recent rises in international sugar prices. The household goods business is also presumed to have continued facing pressure from global inflation.

Researcher Sojeong Cho evaluated, “Demand for the company’s brands during the recent 618 shopping festival was steady, so when the Chinese economy shows signs of normalization, the company’s performance is likely to recover as well.”

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