[Click eStock] "LG, Additional Investment Needed to Improve Holding Company Value... Target Price Raised"

[Asia Economy Reporter Lee Myunghwan] IBK Investment & Securities announced on the 15th that it maintains a buy rating on LG and has raised the target price from 110,000 KRW to 120,000 KRW. This is due to shareholder-friendly decision-making and an increase in the value of investment assets. It analyzed that LG, as a holding company, needs to invest to improve its value.

IBK Investment & Securities diagnosed that LG, a pure holding company, needs to venture into new businesses or investments. LG's earnings consist of dividends, trademark royalties, and rental income received from its affiliates. While dividends and trademark royalties are linked to the performance of affiliates, rental income does not fluctuate significantly and is therefore not considered meaningful, according to IBK Investment & Securities. Although consolidated earnings are large because the main affiliates' performance is reflected through equity method gains and losses, the impact on the holding company's stock price is limited.

It also noted that LG's corporate value has positively changed through affiliate separation. This is because affiliates showed good performance in their core businesses during management succession and affiliate separation. The holding company also holds a large amount of cash through the sale of affiliate shares and dividends. LG announced a plan to expand shareholder returns by converting the source of dividends per share from affiliate dividends to separate net income, following a 50 billion KRW scale share buyback plan.

IBK Investment & Securities analyzed that LG is reviewing new business investments based on the financial flexibility secured through share sales and other means. The sectors under consideration include eco-friendly materials, battery recycling, electric vehicle electronic components, bio-healthcare, and AI/autonomous driving deep tech. These sectors are industries directly or indirectly related to affiliates, creating conditions for potential synergy, according to IBK Investment & Securities. Specifically, the electronic components business is expected to have significant growth potential due to the continuous increase in electric vehicle demand. Deep tech is also evaluated to have meaningful growth value through an organic relationship with affiliates.

IBK Investment & Securities' diagnosis is that LG can further increase corporate value through additional investments. Kim Jangwon, a researcher at IBK Investment & Securities, said, "There is a clear willingness and environment for investment in new growth industries, and changes that can directly affect holding company value are expected, but the execution is disappointing," adding, "While careful consideration is good, decisive action is also necessary."