[Click e Stocks] Will LG Household & Health Care Hit Bottom in Q3 Earnings?

[Asia Economy Reporter Junho Hwang] Shinhan Financial Investment has lowered the target price for LG Household & Health Care to 870,000 KRW. This adjustment is due to the poor performance in the third quarter of this year.

LG Household & Health Care's expected sales for Q3 this year are 1.8597 trillion KRW, representing a 7.5% decrease compared to the previous year. Operating profit is also expected to shrink by 32.2% to 232 billion KRW compared to last year.

The 19.9% decline in cosmetics sales is cited as the main reason for the company's overall poor performance. In particular, it continues to be affected by a significant drop in consumption in China. Currently, the quarantine policy in China remains in place, and it is still difficult to attract tourists for duty-free sales. Previously, sales contributions from live broadcasts in China were significant, but recently, due to stricter regulations following tax evasion issues involving some famous influencers, the impact continues.

It is estimated that distributors secured sufficient inventory in the previous quarter due to the increased likelihood of product price hikes in the second half of this year, while in Q3 2022, the sales growth rate of daily necessities and beverages may have slightly slowed due to distributors depleting their inventory.

Hyunjin Park, a researcher at Shinhan Financial Investment, said, "The stock price has been confirming the bottom for a long time, and there is some room for expectations of industry recovery." He added, "If we assume the possibility of expanded consumption stimulus measures in China in Q4 this year and the reopening effect of cosmetics following quarantine easing, the Q3 performance could be the 'real bottom'."