[Click eStock] Home Appliances & TV Profitability Exceeds Expectations... "LG Electronics, 1Q Outlook Bright"

Operating Profit Expected to Exceed 1.3 Trillion
Home Economy Boosts Appliances and TVs... Automotive Electronic Components Also Sailing Smoothly

[Asia Economy Reporter Minwoo Lee] LG Electronics is expected to post better-than-expected strong results for the first quarter of this year. This is attributed to the profitability of home appliances and TVs being estimated above expectations, along with steady growth in the automotive parts sector.

On the 9th, Kiwoom Securities forecast that LG Electronics will record consolidated sales of 18.0471 trillion KRW and an operating profit of 1.3634 trillion KRW for the first quarter of this year. These figures represent increases of 22.5% and 25%, respectively, compared to last year. In particular, the operating profit is expected to exceed the market consensus of 1.1238 trillion KRW by more than 200 billion KRW. Furthermore, if smartphones are accounted for as a discontinued business, operating profit is estimated to reach 1.6731 trillion KRW. Researcher Jisan Kim of Kiwoom Securities analyzed, "This is due to the continued strong demand for 'Homeconomy' (a portmanteau of Home + Economy, meaning all economic activities are done at home) centered on home appliances and TVs, as well as improvements in the automotive parts business structure."

For home appliances, sales of high-end products such as large-capacity units and the 'Objet Collection' increased, resulting in a significant rise in average selling price (ASP). By region, sales in advanced markets such as the United States and Europe are expected to stand out. In Korea, the rental business focused on steam health appliances is progressing smoothly and is expected to reach 3 million accounts this year.

Regarding TVs, it is analyzed that the expansion of sales of ultra-large models over 70 inches and OLED will offset the impact of sharp panel price increases. OLED TV shipments in the first quarter of this year are expected to more than double compared to the previous year.

The automotive parts sector is also performing well. Despite the emergence of supply disruptions in automotive semiconductors, sales are projected to grow 43% year-on-year, significantly reducing losses, supported by an increased proportion of electric vehicle parts, the launch of new infotainment projects, and the turnaround to profitability of Austrian automotive parts maker ZKW, acquired in 2018. Business solutions are also expected to gradually recover operating strength amid strong demand for non-face-to-face (untact) IT products, while commercial displays and solar power are anticipated to progressively regain momentum.

On the other hand, smartphones, recognized as a marginal business, are expected to see an expanded deficit due to the absence of flagship product lines, procurement disruptions of key products, and costs related to optimizing distribution inventory.

Against this backdrop, Kiwoom Securities maintained a 'Buy' investment rating and a target price of 220,000 KRW for LG Electronics. The closing price the previous day was 143,000 KRW. Researcher Kim stated, "The investment points for LG Electronics remain the resolution of smartphone risks and the rebound of automotive parts, which is a race against time, with visible results expected in the second quarter. Attention should be paid to how cost pressure factors such as rising semiconductor and raw material prices and increased logistics costs will affect future performance."