[Click eStock] "LG, Growth Acceleration Expected After Affiliate Separation"

Resolving Uncertainty... Full-Scale Discovery of New Businesses Begins

[Asia Economy Reporter Minwoo Lee] Following the confirmation of LG Group's spin-off, LG, the holding company, is expected to resolve uncertainties and actively pursue new business opportunities.

On the 14th, NH Investment & Securities maintained a 'Buy' rating on LG and raised the target price by about 27% to 164,000 KRW. The closing price the previous day was 103,500 KRW. This upgrade reflects expectations of accelerated growth after the spin-off.

LG plans to complete the spin-off through a 91:9 physical division by the end of May, with the existing holding company and the newly established holding company being re-listed and newly listed respectively, followed by a share exchange among major shareholders. The new holding company will include LG Sangsa, Pantos, LG Hausys, Silicon Works, and LG MMA. The existing holding company will maintain its core businesses such as electronics, chemicals, and telecommunications. After the spin-off in the second half of the year, it is expected that the use of net cash amounting to 1.8 trillion KRW will accelerate growth by discovering new businesses.

Structural reforms to strengthen core businesses have already begun. Notable examples include LG Chem's push for a physical division and the establishment of an electric vehicle powertrain joint venture (JV) between LG Electronics and Canada's Magna. Additionally, with the enforcement of the revised Fair Trade Act in 2022, the establishment of corporate venture capital (CVC) is expected to highlight its role as a control tower for the business portfolio. Dongyang Kim, a researcher at NH Investment & Securities, predicted, "Following last year's rebound in operating profit due to the base effect and improvement in affiliate structures, operating profit growth of 20% year-on-year is possible this year, supported by strong performances from major affiliates."

Meanwhile, NH Investment & Securities forecasted that LG would record consolidated sales of 2.2457 trillion KRW and operating profit of 559 billion KRW in the fourth quarter of last year. Sales are expected to grow 36% year-on-year, and operating losses are projected to turn into profits. Researcher Kim explained, "Although LG Chem was partially affected by the fire at the Yeosu plant, the major listed subsidiaries are experiencing performance growth," adding, "LG CNS is also expected to maintain profitability improvement due to increased IT investments by LG Group affiliates."