[Click eStock] LG Household & Health Care 2Q Operating Profit 273.3 Billion KRW... 9.4% Decrease YoY

Cosmetics Duty-Free Sales Slump Inevitable... 10% Growth in Chinese Market
Operating Profit in Household Goods Up 42%... Beverage Sector Also Performs Well

[Asia Economy Reporter Minwoo Lee] It is forecasted that LG Household & Health Care will post somewhat sluggish results in the second quarter of this year compared to the same period last year. The decline in duty-free store sales due to the novel coronavirus disease (COVID-19) appears inevitable. Nevertheless, the company is evaluated to have performed well amid the overall sluggish market conditions, thanks to growth in cosmetics sales in China and strong performance in the household goods sector.

On the 3rd, Meritz Securities projected that LG Household & Health Care will achieve sales of 1.7496 trillion KRW and operating profit of 273.3 billion KRW in the second quarter of this year. This represents a 4.5% decrease in sales and a 9.4% decrease in operating profit compared to the second quarter of last year. Net profit for the same period is also expected to decline by 10.4% to 186.5 billion KRW.

The cosmetics sector experienced significant downturns. Sales and operating profit were 942.5 billion KRW and 180 billion KRW, respectively, down 15.0% and 20.4% from the same period last year. The main factor was analyzed to be the decrease in domestic duty-free store sales. The sales decline in the duty-free sector was 40.5%, far exceeding the 8.8% decrease in the non-duty-free sector. Overseas sales were relatively resilient. In particular, sales in China grew by 10% compared to the same period last year, contrasting with an 18% decrease in regions outside China.

On the other hand, the household goods sector showed steady growth. Sales and operating profit are expected to reach 413.5 billion KRW and 40.1 billion KRW, respectively, marking increases of 20.4% and 42.4% compared to the same period last year. This is attributed to increased sales of cleaning products and an expansion in the premium product segment. The beverage sector is also forecasted to see sales of 393.6 billion KRW and operating profit of 53.1 billion KRW, up 3.5% and 11.8%, respectively, from the second quarter of last year.

Against this backdrop, Meritz Securities maintained a 'Buy' investment rating and a target price of 1.6 million KRW for LG Household & Health Care. Hanuri, a researcher at Meritz Securities, explained, "Investment sentiment across the industry is deteriorating due to the prolonged COVID-19 pandemic," adding, "It is a time to seek low volatility rather than high returns."