[Click eStock] "LG Electronics, AI Power Efficiency Beneficiary... Earnings Level-Up Expected"

On the 27th, KB Securities maintained a target price of 150,000 KRW and a buy rating for LG Electronics, stating that it is expected to level up its performance as a beneficiary of AI power efficiency.

Dongwon Kim, a researcher at KB Securities, explained, "LG Electronics has secured a total solution in the cooling system sector that can simultaneously solve the power efficiency and heat generation issues of AI data centers, which are power-hungry, so high growth in B2B heating, ventilation, and air conditioning (HVAC) systems is expected."

Researcher Kim added, "Chillers, which are central HVAC cooling systems essential for newly constructed semiconductor, battery, and nuclear power plants overseas including North America, are expected to see an average annual sales growth of 40%, leading to additional performance level-up in the home appliance business."

The future trend for AI data center cooling systems is expected to be a hybrid method combining air cooling, water cooling, chip direct cooling, and immersion cooling. Therefore, LG Electronics, which has secured various total cooling system solutions, is expected to benefit. The reason why the hybrid method is the trend for AI data center cooling systems is that, since generative AI data to be provided by each industry is not yet concrete, AI data center operators cannot decide what customers will want in the future, so they must prepare for various rack power densities and technologies. Rack power densities are approximately 15?30 kW for air cooling, 20?80 kW for water cooling, 50?100 kW for chip direct cooling, and 50?250 kW for immersion cooling. In particular, immersion cooling, which has the highest rack power density in AI data centers and is emerging as next-generation technology, is a field where LG Electronics has already secured related technology, making vertical integration possible with GS Caltex, which has launched immersion cooling fluids.

Based on the high growth of B2B HVAC systems such as AI data center cooling systems and chillers, LG Electronics' air solution division, which accounts for one-third of home appliance sales, is estimated to reach 10 trillion KRW in sales this year. Therefore, home appliance sales and operating profit in 2024 are expected to grow by 5% and 19% year-on-year to 31.5 trillion KRW and 2.4 trillion KRW, respectively. In particular, LG Electronics has secured all AI core platforms such as automobiles, robots, and smart home appliances that implement generative AI in real life through webOS, so benefits from AI platform expansion are also expected. Meanwhile, LG Electronics' operating profit for 2024 and 2025 is estimated at 4.4 trillion KRW and 5.1 trillion KRW, respectively, due to increased sales of B2B HVAC systems including AI data centers, breaking away from the past seven years of annual operating profits in the 2?3 trillion KRW range and anticipating a performance level-up.