[Click eStock] "LG Electronics offsets B2C demand slump with B2B sales growth"
On the 20th, KB Securities maintained a buy rating and a target price of 140,000 KRW for LG Electronics, expecting solid performance as weak B2C (business-to-consumer) demand due to consumer slowdown is offset by expanded B2B (business-to-business) sales.
The proportion of LG Electronics' B2B sales is expected to reach 28% next year, doubling from 14% in 2021 over three years. In the fourth quarter of this year, VS (Vehicle Components) sales are anticipated to hit a quarterly record of 2.7 trillion KRW, an 8% increase year-on-year, with VS sales estimated to grow 15% to 11.8 trillion KRW next year.
Meanwhile, fourth-quarter H&A (Home Appliances) sales are expected to grow 5% year-on-year to 6.8 trillion KRW, and next year's home appliance sales are projected to remain steady at 30.5 trillion KRW due to the expansion of B2B sales.
Consolidated fourth-quarter results are estimated at 23.3 trillion KRW in sales and 857.4 billion KRW in operating profit, aligning with market consensus estimates. However, there may be future earnings volatility depending on the intensity of promotional expenses during the demand season marketing in November and December.
Next year, LG Electronics' sales and operating profit are expected to increase by 5% and 3% year-on-year to 88.6 trillion KRW and 4.2 trillion KRW, respectively. Dongwon Kim, a researcher at KB Securities, explained, "Next year's profit growth trajectory for LG Electronics will be driven by the VS segment," adding, "VS sales and operating profit are estimated to increase 15% and 147% year-on-year to 11.8 trillion KRW and 449 billion KRW, respectively."
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He further stated, "In particular, the automotive electronics performance of LG Electronics' three affiliates is expected to simultaneously enter a profit track from losses for the first time in three years," and "Accordingly, the operating profit contribution of the VS business is expected to expand from 4% this year to 11% next year."
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