[Click eStock] "LG Household & Health Care Faces Tougher Q4... Target Price Down"

Yuanta Securities significantly lowered the target price for LG Household & Health Care from 570,000 KRW to 400,000 KRW on the 31st. The investment rating was maintained at 'Buy.'

LG Household & Health Care recorded sales of 1.7462 trillion KRW and an operating profit of 128.5 billion KRW in the third quarter. This was a level of 'earnings shock' that fell far short of market expectations. Profitability was hit by the economic downturn in China, and company-wide operating profit declined as domestic restructuring costs were also reflected during the business efficiency improvement process. In particular, the cosmetics division's operating profit amounted to only 8 billion KRW, down 88% compared to the same period last year. Sales in China fell by 34% due to factors such as weakened consumer sentiment in China.

Lee Seung-eun, a researcher at Yuanta Securities, said, "Considering the expected price resistance in duty-free and Chinese performance due to new product price increases in the fourth quarter this year, conservative estimates, increased marketing investments for major brands, and expanded costs related to overseas restructuring, this is judged to be the most difficult period of the year." He added, "From a profitability perspective, marketing investments for major brands and North American restructuring costs are expected to expand further compared to this quarter, and costs related to the closure of Sum:37 Ohui's offline stores in China, starting from the fourth quarter, are also scheduled." He continued, "After going through a difficult period in the fourth quarter this year, the results of rebranding next year are expected to determine the direction of the stock price."