[Click eStock] "LG Electronics, Q1 Earnings Surprise... Expected to Play Defensive Stock Role"

[Asia Economy Reporter Minji Lee] Hana Financial Investment maintained a buy rating on LG Electronics on the 8th, citing a first-quarter earnings surprise, and set a target price of 95,000 KRW.

In the first quarter of this year, Hana Financial Investment's operating profit was 1.0904 trillion KRW, exceeding the market expectation of 874.7 billion KRW. The main drivers of the earnings surprise were the Home Appliance & Air Solution (H&A) division, the Home Entertainment (HE) division, and LG Innotek. Researcher Kim Rok-ho from Hana Financial Investment stated, “LG Electronics recorded solid earnings separately,” and added, “LG Innotek’s performance is also judged to have been a surprise.”

The H&A division is estimated to have benefited from entering the seasonal peak period and strong premium demand mainly in the domestic market. In particular, marketing expenses were reduced before the full impact of the novel coronavirus disease (COVID-19) took effect, which appears to have offset the slowdown in sales.

The HE division faced increased cost burdens due to unfavorable exchange rates and rising LCD panel prices, but it is believed to have achieved favorable profits thanks to reduced marketing expenses. Researcher Kim Rok-ho explained, “OLED sales seem to have developed well in cost reduction channels,” and estimated that the results exceeded expectations for the H&A division (90 billion KRW), the HE division (80 billion KRW), and LG Innotek (over 100 billion KRW).

The company’s stock price is expected to trend upward in the short term. While the direction of the second-quarter guidance will be important, it is anticipated to play a key role as a defensive stock focused on earnings amid uncertainty. Researcher Kim Rok-ho added, “Although there were concerns about a slowdown in premium demand, premium consumers showed steady consumption despite the impact of COVID-19.”