[Click e-Stock] "LG Electronics, Operating Profit Forecast Down 6.4% This Year... Target Price Lowered"

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[Asia Economy Reporter Kwon Jaehee] On the 1st, DB Financial Investment maintained a 'Buy' rating on LG Electronics but lowered the target price from 180,000 KRW to 160,000 KRW.

Operating profit for Q2 this year (figures for LG Electronics only, excluding LG Innotek) was revised down from 663 billion KRW to 586.3 billion KRW. While B2B businesses such as VS (Vehicle Component Solutions) and BS (Business Solutions) are performing well, the representative B2C business, TV, continues to struggle. TV demand has declined due to pent-up consumption easing, inflation, and high interest rates dampening consumer sentiment, leading to reduced market demand. Meanwhile, raw material and logistics costs have risen, resulting in very poor profitability for the HE (Home Entertainment) division in Q2. However, H&A (Home Appliance & Air Solution) still shows decent demand for premium appliances, making double-digit sales growth and expected profitability appear achievable.

The VS division is expected to achieve its first-ever profit starting in Q2, with sales exceeding 2 trillion KRW, driven by an increased proportion of EPT (Electric Power Train) parts and a rise in high-quality orders secured since 2018. Based on order backlog, the EPT parts ratio seems close to 20%. After withdrawing from the solar panel business, BS is expected to see a flexible improvement in profit margins, with significant sales growth in ID (Information Display). Although the COVID-19 special demand for IT devices has disappeared, sales remain focused on high value-added products. The BS division, which recorded losses in the second half of last year, is expected to maintain stable profitability above mid-single digits going forward.

Kwon Seongryul, a researcher at DB Financial Investment, analyzed, "We are lowering LG Electronics' operating profit forecast by 6.4% this year. Although the TV segment's weakness is painful, improvement is expected in the second half as the OLED TV market expands."