[Click eStock] "LG Electronics, Further Decline Limited... Target Price Down"

NH Investment & Securities on the 21st lowered the target price for LG Electronics from 170,000 KRW to 130,000 KRW, considering slower-than-expected front-end demand. However, since the current stock price is close to historical valuation lows, further declines are seen as limited, and the investment rating of 'Buy' was maintained.

Lee Kyu-ha, a researcher at NH Investment & Securities, explained, "We adjusted earnings downward considering that the recovery in demand for home appliances and TVs is slower than expected, and lowered the target price reflecting the decline in global industry valuations. We revised operating profit estimates for this year and next year down by 6.7% and 10.6%, respectively, reflecting the delayed demand recovery, and lowered the target price by 23.5% considering the downward earnings revisions and valuation declines among global peers."

The sluggish demand for home appliances is disappointing. Initially, a gradual demand improvement was expected in the second half of 2023, supported by a recovery in the macroeconomic environment and real estate market transaction volumes, but the recovery is now forecasted to be delayed. The researcher said, "A full-scale recovery is expected to be possible after the first half of 2024," adding, "The continued slowdown in demand for high-end TVs is also negative." He further noted, "Although the automotive parts division continues to show high growth, it is regrettable that order backlogs and sales growth are slowing due to recent weakening demand for electric vehicles."

However, the stock price is expected to have limited further downside as it approaches historical valuation lows. The researcher said, "Currently, LG Electronics' stock is trading at a 2024 price-to-earnings ratio (PER) of 7 times and a price-to-book ratio (PBR) of 0.8 times, close to historical valuation lows," and recommended, "Focus on the medium- to long-term recovery in home appliance demand and growth potential in the automotive parts division rather than short-term earnings."

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