[Click eStock] "LG Electronics with Enhanced Stamina... A Buying Opportunity at the Low Point"

[Asia Economy Reporter Myunghwan Lee] BNK Investment & Securities announced on the 15th that it has newly issued a Buy rating and a target price of 120,000 KRW for LG Electronics, citing strengthened fundamentals due to business restructuring.

BNK Securities analyzed that LG Electronics is expected to stabilize with a higher growth rate than before the pandemic as it enters the endemic phase (periodic recurrence of infectious diseases). However, it noted that in the short term, a slowdown in consumer spending and the disappearance of pandemic-related demand will inevitably lead to a decline in home appliance demand.

They reviewed that the boom in home appliance demand over the past few years was not only due to pandemic-related factors but also replacement demand. BNK Securities analyzed that more than half of the home appliance demand during the pandemic period was replacement demand. Considering the average replacement cycle of 10 years, they expect replacement demand to continue for some time.

It is analyzed that LG Electronics has shown differentiated performance compared to competitors since last year by increasing sales of premium and new home appliances. Last year, LG Electronics surpassed the American home appliance company Whirlpool for the first time to become the global number one in annual sales. This success is attributed to the differentiated strategy of expanding sales of premium and new home appliances.

Considering the trend toward premiumization of home appliances and the rising market share, BNK Securities expects the performance gap compared to competitors to continue. They also forecast that in the second half of the year, price increases reflecting rising costs will be actively expanded across product lines.

However, the situation in the TV market, one of LG Electronics' major product categories, is not favorable. Since the second half of last year, demand has sharply declined, and the TV market is expected to contract again this year. They pointed out that the recent sharp drop in LCD prices is also dampening demand for premium TVs. Nevertheless, due to the still high price premium of organic light-emitting diode (OLED) TVs and the increasing sales proportion of OLEDs, the average selling price (ASP) is expected to rise by 4% this year. Sales revenue is also forecasted to maintain last year's level or higher thanks to exchange rate gains.

Minhee Lee, a researcher at BNK Investment & Securities, advised, "It is necessary to pay attention to the strengthened fundamentals that differ from before," and recommended, "Since the unfavorable business environment continues and the stock price decline trend persists, a low-price buying strategy using volatility is advised."