[Click eStock] "LG Saenggeon, Short-Term Rebound Difficult... Target Price Down"

Meritz Securities announced on the 3rd that it is lowering the target price for LG Household & Health Care from 750,000 KRW to 630,000 KRW. The investment rating remains at 'Buy.'

LG Household & Health Care is expected to record sales of 1.8498 trillion KRW and an operating profit of 182.2 billion KRW in the second quarter. Compared to the same period last year, sales slightly decreased by 0.7%, and operating profit declined by about 16%. This is interpreted as a deterioration in profitability due to sluggish cosmetics sales combined with increased costs in household goods and beverages.

In the cosmetics segment, overseas performance improved, but domestic results showed weakness. Notably, 75% of profits are generated in China (including domestic duty-free and local Chinese sales), but the commission rate for 'Daigou'?Chinese personal shoppers in the duty-free industry?and the maturation of the Chinese cosmetics market are acting as obstacles.

The household goods segment is expected to experience prolonged margin contraction. It is analyzed that the expansion of shared overhead costs and the premium product ratio have reached their upper limit. The beverage segment also lacks growth drivers. While the government is urging price reductions for major food and beverage products (ramen, snacks, flour, etc.), further price increases for cola are difficult. Additionally, the World Health Organization's (WHO) designation of aspartame as a carcinogen negatively impacts zero-calorie carbonated beverage sales.

Hanuri, a researcher at Meritz Securities, stated, "We believe a short-term rebound is difficult and recommend a conservative approach."

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