[Click eStock] "'B2B Expansion' LG Electronics, Target Price 160,000 Won"

Korea Investment & Securities on the 18th initiated coverage on LG Electronics with a buy rating and a target price of 160,000 KRW. The previous day's closing price was 112,100 KRW.

Seoul Yeouido LG Twin Tower panorama / Photo by Jinhyung Kang aymsdream@

Sanghyun Park, a researcher at Korea Investment & Securities, said, "LG Electronics is at a turning point as the business focus shifts from B2C (business-to-consumer) to B2B (business-to-business)." He added, "The proportion of B2B business in total sales steadily increased from 26.0% in 2020 to 35% last year."

He analyzed, "Dell can be cited as a successful example of a company that transitioned to B2B. As the personal PC market entered a low-growth mature phase, Dell strengthened its business capabilities in B2B sectors such as enterprise PCs, servers, storage, and networking infrastructure products."

He continued, "Dell's transformation was successful. From 2015 to last year, the data center infrastructure division's revenue grew at a compound annual growth rate (CAGR) of 10.7%, and the average annual operating profit growth rate from fiscal years 2020 to 2023 was an impressive 30.1%. LG Electronics today closely resembles Dell at that time. The B2B success formula proven by Dell can also be applied to LG Electronics," he emphasized.

This year, B2B business sales and operating profit are estimated at 28.3 trillion KRW and 1.3 trillion KRW, respectively. Researcher Park stated, "Excluding LG Innotek on a separate basis, the B2B business proportion of total performance is expected to be 41.8% in sales and 42.5% in operating profit." He added, "Long-term growth and profitability are also expected through 2028. Over the next five years, B2B business sales and operating profit are projected to increase at a CAGR of 10.6% and 27.4%, respectively. These growth rates significantly exceed the estimated growth rates of 3.3% and 8.8% for B2C business sales and operating profit during the same period."