[Click e Stocks] "LG Saenghwal Geongang, Short-Term Price Rebound Difficult"

[Asia Economy Reporter Song Hwajeong] Meritz Securities forecasted on the 27th that LG Household & Health Care's stock price will continue to weaken for the time being due to the lack of growth drivers and weakening investment momentum, while maintaining a 'Buy' investment rating and a target price of 1.7 million KRW.

LG Household & Health Care recorded sales of 2.01 trillion KRW and operating profit of 342.3 billion KRW in the third quarter. Sales decreased by 2.9% compared to the same period last year, but operating profit increased by 4.5%. Hanuri, a researcher at Meritz Securities, explained, "In cosmetics, sales decreased while profits increased, whereas in household goods and beverages, sales increased but profits decreased." The cosmetics division posted sales of 1.0267 trillion KRW, down 10.2%, and operating profit of 215.6 billion KRW, up 9%. Researcher Han said, "The operating environment was challenging due to market stagnation and shipment issues," adding, "Duty-free sales (-5.2%) turned to negative growth, underperforming the market, and China (2.0%) also fell short of expectations." Profitability improved due to cost reductions from marketing expense cuts and withdrawal from loss-making stores.

Household goods recorded sales of 540 billion KRW, up 6.1%, and operating profit of 63.7 billion KRW, down 4.4%. The acquisition effects of brands such as 'Physiogel' and 'Boinca' contributed to strong performance in other product categories, but margin contraction due to a tough base effect was inevitable. Beverages posted sales of 443.7 billion KRW, up 6.1%, and operating profit of 63 billion KRW, down 0.2%. Although the product mix improved, it was insufficient to offset the increase in raw material costs.

Researcher Han stated, "With no growth drivers and weak investment momentum, it is difficult for the stock price to rebound in the short term," adding, "The country's largest cosmetics brand 'Whoo' is also not free from the negative base effect in China and stagnation in the duty-free market, making it hard to expect a special boost from the 4th quarter Guanggunjie (光棍節: China's largest shopping festival)."