[Click eStock] Daishin Securities Raises LG Household & Health Care Target Price to 2 Million Won

[Asia Economy Reporter Ji Yeon-jin] Daishin Securities announced on the 28th that it has raised the target price of LG Household & Health Care to 2 million KRW due to the recent rise in stock prices of cosmetics and daily necessities-related stocks.

LG Household & Health Care reported consolidated sales of 2.0944 trillion KRW in the fourth quarter of last year, up 4% year-on-year and 1% quarter-on-quarter. Operating profit decreased by 22% quarter-on-quarter but recorded 256.3 billion KRW, up 6% year-on-year. Duty-free cosmetics and cosmetics sales in the Chinese market increased by 7% and 41% year-on-year respectively, surpassing the market growth rate (duty-free cosmetics -35%, China estimated 20%), and online sales in China increased by 116% year-on-year. The sales of cosmetics brands Whoo and Soom, and O Hui increased by 19%, -13%, and +38% year-on-year respectively, outperforming the market growth rate.

In particular, LG Household & Health Care's local Chinese subsidiary's cosmetics sales exceeded 1 trillion KRW last year, compensating for the gap in the domestic duty-free channel. Sales to China increased by only 3% year-on-year. Even if the Korean duty-free market continues to be affected by COVID-19, LG Household & Health Care's sales to China this year are estimated to increase by 14% from last year to 2.9 trillion KRW.

Especially, LG Household & Health Care recorded sales of 32 billion yuan (approximately 5 trillion KRW) at duty-free shops on Hainan Island, China. Since July last year, when regulations such as duty-free limits were relaxed, monthly sales have continued to increase by more than 100% compared to the same period last year. In December last year, the joint venture of Dufry, the world's largest duty-free company, opened the ‘Sanya International Duty-Free Shopping Park,’ and the joint venture of Lagard?re, France's largest leisure company, opened the ‘Sanya Hailui Duty-Free Shop.’ This year, before the Lunar New Year in February, two duty-free shops and one additional duty-free shop are scheduled to open in the first quarter, expanding the total number of duty-free shops on Hainan Island to 10.

Hwang Yoo-jung, an analyst at Daishin Securities, said, "According to local Chinese media reports, the sales target for duty-free shops on Hainan Island in 2022 is known to be 100 billion yuan (approximately 17 trillion KRW)." She added, "With the Chinese government's massive support policies combined with the impact of COVID-19, China's influence in the global consumer market is expanding at an unprecedented pace, so a reassessment of the strong local demand and responsiveness of LG Household & Health Care's major brands in China is necessary."