[Click eStock] "LX Hausys, Gradual Performance Improvement Expected from Q4"

[Asia Economy Reporter Park Jihwan] Yuanta Securities evaluated on the 23rd that gradual performance improvement is expected for LX Hausys.

Researcher Kim Giryong of Yuanta Securities stated, "This year, LX Hausys was incorporated into the LX Group from LG Group, and the company name was changed from LG Hausys to LX Hausys in July," adding, "Even after joining the LX Group, the existing growth strategies such as expanding the B2C-centered building materials business, normalizing and planning the sale of the automotive and materials division are considered valid."

The building materials division, which is driving the company's overall performance, is expanding premium products centered on PF insulation materials and Easton in the U.S., and has newly established kitchen, bathroom, and door business units, thereby concretizing the expansion of the B2C business. It is evaluated that LX Hausys is gradually increasing brand awareness of LX through home shopping and advertising by launching the LX Hausys package, which adds kitchen and bathroom products to existing manufacturing items such as windows, flooring, and wallpaper.

Although there are short-term cost burdens, a gradual recovery in performance is expected. In the third quarter of this year, LG Hausys' consolidated sales reached 868.3 billion KRW, a 12.6% increase year-on-year. However, operating profit was 11.2 billion KRW, down 60.2%, marking an earnings shock. Despite growth in building materials sales, the decrease in operating profit was prominent due to the spread contraction caused by the sharp rise in prices of major raw materials such as PVC, MMA, and plasticizers.

Performance is expected to show gradual recovery due to the completion effect of the 4th PF insulation material line and the increase in new construction volume leading to growth in building materials sales and fixed cost reduction. Researcher Kim Giryong forecasted, "The automotive and materials division, which has recorded operating losses since the first quarter of 2019, will also reduce the deficit through fixed cost reductions from two impairment losses in the automotive division and in-house cost improvement programs."

Furthermore, the launch of packages targeting the interior and remodeling B2C market, the establishment of kitchen, bathroom, and door business units, and the structural improvement through the reduction of operating losses in the automotive materials division are evaluated as investment points from a mid- to long-term perspective.