[Click e Stocks] "LG Electronics, Earnings Improvement Expected in First Half of Next Year... Target Price Down"

On the 19th, KB Securities forecasted that LG Electronics' performance will improve in the first half of next year and lowered the target stock price from 140,000 KRW to 130,000 KRW. The investment rating was maintained at 'Buy.'

Dongwon Kim, a researcher at KB Securities, stated, "The target price adjustment reflects the downward revision of operating profit estimates for this year and next year by 11.1% and 3.3%, respectively, due to the expected underperformance in the fourth quarter results this year." He added, "However, despite the global consumer economy slowdown, the expansion of B2B (business-to-business) sales proportion will lead to record-high sales this year in home appliances (H&A) and automotive components (VS), reaching 30 trillion KRW and 10 trillion KRW, respectively."

LG Electronics' fourth-quarter results are expected to fall short of market consensus. KB Securities estimates LG Electronics' consolidated fourth-quarter sales to increase by 4% year-on-year to 22.7 trillion KRW, with operating profit soaring by 480% to 401.5 billion KRW. Researcher Kim explained, "The fourth-quarter results are expected to underperform market consensus due to a slowdown in premium demand for TVs and home appliances, coupled with increased marketing expenses leading to a decline in profitability."

Performance volatility is expected to ease next year. Sales and operating profit for next year are projected at 85.8 trillion KRW and 4.1 trillion KRW, respectively, representing increases of 3% and 13% compared to the previous year. Kim said, "The operating profit ratio for the first and second halves of next year is expected to be 53% and 47%, respectively, compared to 62% and 38% this year, indicating reduced performance volatility." He added, "Although global home appliance demand is expected to continue slowing next year, the expansion of B2B sales proportion will partially offset the decline in B2C (business-to-consumer) demand. Additionally, the recovery of global demand for TVs, PCs, and smartphones, along with increased shipments due to sports events, is expected to improve performance in the HE (TV) and BS (PC) divisions." He further noted, "In particular, operating profits for the first and second quarters of next year are expected to improve to 1.26 trillion KRW and 919.4 billion KRW, respectively."

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