[Click eStock] "LG Saenghwal Geongang, Expecting Rebound Amid Q2 Earnings Slump"

After Q1 Earnings Announcement, Stock Price Adjusting
Q2 Operating Profit Expected to Decrease 11% YoY
Considering Low Stock Price Level, Small Positive News Could Trigger Rebound

Sangsangin Securities analyzed on the 1st that although LG Household & Health Care's second-quarter earnings outlook is not favorable, considering the low stock price, there is sufficient potential for a rebound. The investment opinion 'Buy' and the target price of 530,000 KRW were maintained.

Researcher Kim Hyemi of Sangsangin Securities stated, "After the first-quarter earnings announcement, LG Household & Health Care's stock price, which was attempting a rebound, has recently been adjusted again," adding, "This is attributed to the overall sluggishness in the Chinese market and the momentum of expansion outside China driving the rise of cosmetics-related stocks."

LG Household & Health Care's second-quarter 2024 earnings are expected to be 1.7888 trillion KRW in sales and 152.3 billion KRW in operating profit. By segment, cosmetics sales are projected to decrease by 3% year-on-year, and operating profit is expected to decline by 11%. Duty-free sales increased by 17% compared to the previous quarter but decreased by 17% year-on-year. Local sales in China are expected to slightly increase compared to the previous quarter due to major online events in the first half and record growth in the low double digits year-on-year.

The household goods segment is forecasted to see a 2% decrease in sales year-on-year, while operating profit is expected to increase by 13%. The resumption effect of Coupang and growth in online channels continue, but the scale is somewhat reduced due to North American restructuring in the same period last year. However, profitability is expected to strengthen thanks to the premium brand cultivation strategy.

The beverage segment is expected to see a 2% increase in sales year-on-year, but operating profit is projected to decline by 3%. Increased cost burdens due to intensified carbonated beverage competition and sluggish offline distribution channels, combined with the inability to pass on price increases, are expected to reduce profitability.

Researcher Kim said, "Expectations for second-quarter earnings are not high, but considering the currently low stock price, even small positive factors could trigger a rebound," adding, "Considering the low base due to restructuring in the second half of last year, a turnaround is expected in the second half, and the time to raise interest is approaching."