[Click eStock] "LG Hausys, Moderate 4Q Earnings Outlook"

Good Performance in Building Materials Expected to Continue... Deficit Divisions Also Being Streamlined

[Asia Economy Reporter Minwoo Lee] LG Hausys is expected to post improved profitability in the fourth quarter results due to the stabilization of each business division. It is anticipated that the company will strategically focus on the building materials sector while restructuring loss-making divisions.

On the 31st, KB Securities forecasted that LG Hausys would achieve consolidated sales of 782.3 billion KRW and an operating profit of 15.8 billion KRW in the fourth quarter of this year. Although sales decreased by 2.8% compared to the same period last year, operating profit increased by 395.8%. This is attributed to the stabilization of raw material prices and normalization of overseas factory operating rates, maintaining a stable performance trend following the previous quarter. However, the results are expected to be somewhat weaker than the previous quarter due to typically higher expenses in the fourth quarter and the previous quarter reflecting gains from the sale of Ulsan company housing.

The strong performance of the building materials division is expected to continue into next year. KB Securities analyst Moonjun Jang explained, "From a stock perspective, the separation of LG Group affiliates and the planned sale of the automotive and industrial film divisions have become important. The sale of these divisions is expected to lead to further performance improvements by restructuring loss-making units and allow for strategic focus on the building materials sector."

However, he added that an excessive dependence on the domestic housing market could be a burden. Reflecting this, next year's performance is estimated at sales of 3.0545 trillion KRW and operating profit of 93.1 billion KRW. This represents a 1.9% increase in sales and a 19.4% increase in operating profit compared to this year's forecast.

Against this backdrop, KB Securities maintained a 'Hold' investment rating on LG Hausys while raising the target price by 25% to 85,000 KRW. The closing price on the previous day was 78,000 KRW. Analyst Jang stated, "Despite adjustments to the cost of equity due to various household changes (from 8.83% to 9.43%), the target price was raised due to upward revisions in earnings estimates following the stabilization of each business division. However, despite positive factors such as improved performance and the planned sale of loss-making divisions, the upside potential of the target price is only 11.7%, so the existing 'Hold' rating was maintained."