Chemistry, Life Sciences, Electronics... The Golden Era of LG Group Stocks

Subsidiaries Show Strong Q2 Performance
Foreign Buying Surge
Subsidiary Stock Prices Soar

[Asia Economy Reporters Song Hwajeong, Lee Minwoo] LG Group stocks have been on a continuous upward trend. The strong second-quarter earnings of the group's affiliates have attracted a large influx of foreign buying, driving up stock prices.

According to the Korea Exchange on the 10th, LG Chem reached an all-time high of 758,000 KRW on the 7th. This is a 229.6% increase compared to 230,000 KRW on March 19, when fears of the COVID-19 pandemic peaked. The strong second-quarter performance and the growth potential of the secondary battery business, which is leveraging the electric vehicle market, have attracted massive buying interest. The stock price has risen for seven consecutive trading days, and its market capitalization ranking has surged. As of the closing price on the 7th, its market cap was 52.662 trillion KRW, ranking third overall. The gap with second-place SK Hynix (58.677 trillion KRW) has narrowed to 6 trillion KRW.

LG Household & Health Care, the most expensive "emperor stock" in the domestic market, is also sailing smoothly. It rose about 6% from 1.35 million KRW on the 3rd to 1.432 million KRW on the 7th. After hitting a 52-week high of 1.49 million KRW in May and undergoing some correction, it has recently started to rebound.

LG Electronics, the eldest sibling in the group, also rose about 8% to 80,200 KRW as of 9:20 a.m. on the same day compared to early this month. The group's holding company LG's stock price is also soaring amid the affiliates' upward momentum. The closing price on the 7th was 87,000 KRW, the highest since April 4, 2018. It has steadily risen since the 31st of last month, increasing by more than 16%. Shim Wonseop, a researcher at Cape Investment & Securities, said, "The sale of a 35% stake in LG CNS for 1 trillion KRW successfully concluded the first investment and recovery cycle after the holding company transition. With a net cash position of 1.7 trillion KRW on a standalone basis, LG has overwhelming investment resources compared to other holding companies, so it is expected to start domestic business expansion in the second half of the year and begin full-scale overseas expansion from next year."

This stock price rise has been driven by foreigners. Despite turning to a selling trend in the domestic stock market for the first time in four weeks last week, foreigners heavily bought LG Group stocks. The most purchased stock by foreigners from the beginning of this month to the 7th was LG Chem, with net purchases of 125.1 billion KRW. LG Electronics (64.9 billion KRW) and LG Household & Health Care (53.2 billion KRW) followed. LG also saw net purchases of 29.6 billion KRW, with four LG Group stocks ranking among the top 10 net purchases. Foreigners continued net buying of LG for seven consecutive days. For LG Chem, they bought on all but four trading days in the past month. For LG Household & Health Care, they net bought on all but one of the last 11 trading days.

The foreign buying and stock price rise are interpreted as being due to strong second-quarter earnings and positive future outlooks. LG Chem, LG Electronics, and LG Household & Health Care all exceeded market expectations in their second-quarter results.

LG Chem posted second-quarter sales of 6.9352 trillion KRW and operating profit of 571.6 billion KRW, a surprise performance exceeding market forecasts by 30%. In particular, the battery division recorded its highest-ever quarterly performance with sales of 2.823 trillion KRW and operating profit of 155.5 billion KRW. The performance momentum is expected to continue in the second half. Hwang Kyuwon, a researcher at Yuanta Securities, said, "The expected operating profit for the second half is 1.1 trillion KRW, a 37% improvement compared to the first half. Despite the strong stock price rebound in the second quarter, it is still too early to talk about overvaluation." He forecasted that the stock price revaluation process will continue as the battery division simultaneously grows in scale and improves profitability.

LG Household & Health Care recorded second-quarter sales of 1.7832 trillion KRW and operating profit of 303.3 billion KRW. While sales decreased by 2.7% year-on-year, operating profit increased by 0.6%, marking the highest quarterly operating profit ever. This contrasts with competitor Amorepacific, which struggled in the second quarter. LG Electronics also posted strong results exceeding market expectations in the second quarter, driven by increased sales of home appliances and hygiene and health appliances due to COVID-19.