[Click eStock] "LG Hausys, Earnings Hit Bottom... Target Price Up 44%"

[Asia Economy Reporter Park Jihwan] Yuanta Securities evaluated that LG Hausys is moving past the bottom of its earnings due to a reduction in losses in the film business segment affected by the novel coronavirus disease (COVID-19) and profit growth in the building materials segment. Accordingly, it maintained a 'Buy' investment rating and raised the target price by 43.6% from the previous 55,000 KRW to 79,000 KRW.

Kim Giryong, a researcher at Yuanta Securities, explained, "LG Hausys is expected to slightly exceed the raised market estimates in the third quarter," adding, "Consolidated sales are projected at 743.7 billion KRW, and operating profit at 22.9 billion KRW, surpassing the increased market operating profit estimate of 21.2 billion KRW."

LG Hausys' sales are estimated to decrease year-on-year due to export and automotive performance slowdowns caused by COVID-19 and typhoon impacts in August, despite the effect of the PF insulation material Line 3, completed in April (annual sales approximately 70 billion KRW). However, operating profit is expected to reflect expanded contributions from PF insulation material performance, improved window segment mix through selective B2B orders, the effect of Eastone Line 3, and favorable exchange rate effects.

Researcher Kim Giryong stated, "The company is targeting premium building materials products and the interior and remodeling market, expanding from the existing automotive lightweight parts business including the acquisition of c2i," and added, "In August, it announced investment plans for PF insulation material Line 4 to respond to the revised Building Act aimed at strengthening fire safety performance and policies for energy efficiency in aging buildings." The full capacity annual sales of PF insulation material Lines 1 to 4 are expected to reach about 350 billion KRW.

He emphasized, "The reduction in losses in the automotive material film business, which was directly affected by COVID-19, and profit growth in the building materials segment confirm that the earnings bottom has been reached," and added, "The ongoing realization of the sale of the automotive business division is expected to be a point that can lead to further fundamental improvements and stock price increases."