[Click eStock] "LG Household & Health Care, Limited Valuation Pressure but Momentum Slowdown Possible... Target Price Down 12%"

[Asia Economy Reporter Kwon Jae-hee] KB Securities maintained its investment opinion of 'Hold' on LG Household & Health Care on the 19th, lowering the target price by 12% to 750,000 KRW.

LG Household & Health Care's consolidated sales for the third quarter are expected to be 1.9157 trillion KRW, and operating profit is forecasted at 244.8 billion KRW, representing decreases of 5% and 29% respectively compared to the same period last year. However, these figures are expected to meet market expectations.

By business segment, cosmetics sales and operating profit are expected to decline by 17% and 49%, respectively. Sales in China are projected to fall by 22%, with operating profit decreasing by around 50%. Duty-free sales are estimated at 360.4 billion KRW, down 25% year-on-year but up 8% compared to the previous quarter. Pure domestic sales are expected to decline by 8%.

Sales of household goods are expected to grow by 7%, but operating profit is projected to increase by only 4%. Thanks to the effects of new products such as hair dye shampoo and increased raw material sales, steady sales growth is continuing; however, profitability is expected to worsen compared to the previous year due to rising raw material costs.

Beverage sales are estimated to grow by 10%, with operating profit increasing by 7%. Both volume and price are rising, supported by the popularity of 'zero-calorie carbonated drinks' and the effects of price increases.

Park Shin-ae, a researcher at KB Investment & Securities, explained, "Due to the Chinese government's passive economic stimulus measures, not only is there an increase in cosmetics inventory, but expectations for the November Singles' Day event are also declining. Although LG Household & Health Care's current stock price has limited valuation pressure and its performance appears to be passing through the worst phase, the possibility of 'momentum slowdown' still exists from a mid- to long-term perspective, so we maintain the investment opinion of 'Hold.'"