[Click eStock] "LG Corp., Operating Profit Reduction Unavoidable This Year"

LG [Image source=Yonhap News]

[Asia Economy Reporter Hwang Yoon-joo] Heungkuk Securities stated that a decline in operating profit for LG this year is inevitable. The investment opinion is 'Buy', and coverage was newly initiated with a target price of 110,000 KRW.

Jong-ryeol Park, a researcher at Heungkuk Securities, said, "This year's annual sales are expected to increase by 13.5% from the previous year to 7.8 trillion KRW, while operating profit is expected to decrease by 8% to 2.3 trillion KRW."

Researcher Park explained, "The consolidated operating profit for the first half of this year was 1.3 trillion KRW, down 14.1% compared to the previous year," adding, "The overall trend in the second half is expected to be similar to the first half, and the key factor will be the extent of the decrease in equity-method income."

LG Corporation's consolidated operating profit for the first half of this year decreased compared to last year due to a decline in equity-method profit and loss from the chemical affiliates, despite strong performance from LG CNS and reduced operating losses from D&O and other subsidiaries. This was caused by deteriorating profitability in the petrochemical business and weakness in LG Household & Health Care's duty-free and China businesses.

Researcher Park analyzed, "If global uncertainties prolong, the currently favorable business conditions could deteriorate," and added, "A decline in trade volume due to global demand slowdown and a reversal in raw material prices are inevitable." However, he expected that LG's diverse business portfolio would keep profit volatility low.

He continued, "Along with a consistent dividend policy, LG is also conducting treasury stock acquisitions (500 billion KRW by 2024, currently 21% achieved)," and evaluated, "The proactive shareholder return policy is also positive."