[Click eStock] "LG Electronics, Q1 Maximizes Strengths as an Investment Opportunity"

[Asia Economy Reporter Eunmo Koo] Kiwoom Securities has diagnosed that the first quarter will again be an investment opportunity for LG Electronics this year. Home appliances with solid product competitiveness will lead the performance, and the strengthening of premium positioning in Europe is expected to be prominent. The previously concerning TV segment is also expected to recover profitability through mix improvement centered on organic light-emitting diode (OLED) technology.

On the 18th, Kiwoom Securities analyst Jisan Kim pointed out in a report that the first quarter is the period when LG Electronics' strengths are most fully demonstrated. The first quarter is the peak season for LG Electronics' firmly established home appliance domestic market, a time when demand for high-value-added health appliances increases due to worsening air quality, and simultaneously, the Achilles' heel, smartphones, reduce their deficit through year-end asset efficiency processes.

Analyst Kim said, “Considering the lowered expectations after a disappointing fourth quarter, the improvement in first-quarter performance is bound to be steep, leading to a reevaluation of LG Electronics' competitiveness in home appliances and TVs,” and predicted, “It seems highly likely that the first-quarter operating profit will exceed the market expectation of 842.1 billion KRW this year as well.”

By business division, home appliances are expected to drive performance. Analyst Kim explained, “Premium positioning is strengthening in Europe, with significant increases in sales of air conditioners, washing machines, and dryers. In the U.S., the production capacity and cost competitiveness of the Tennessee plant are improving, and in Korea, the second-generation new growth product groups such as dishwashers and electric ranges are forming new trends.”

He added, “TV mix improvement centered on OLED will materialize, and the normal operation of LG Display's Guangzhou plant will improve OLED panel procurement conditions,” and forecasted, “The recent rebound in liquid crystal display (LCD) panel prices will create a favorable environment compared to the quantum dot light-emitting diode (QLED) camp.”

Smartphones are expected to improve profitability by increasing the proportion of original design manufacturing (ODM). Analyst Kim evaluated, “The strategy revised to focus on reasonably priced ‘mass premium phones’ in Korea also seems desirable in terms of reducing marketing costs.”

Furthermore, he anticipated, “Automotive parts, with an order backlog exceeding 50 trillion KRW, will support profit improvement along with economies of scale, and business solutions will continue a significant growth trend and high profitability compared to the same period last year, led by premium information displays and high-output residential solar power.”