[Click eStock] "LG, Subsidiary Stock Price and Performance Down... Target Price Lowered"

Hana Securities on the 31st downgraded the target price for LG from 105,000 KRW to 95,000 KRW, citing "the decline in stock prices and poor performance of major subsidiaries." The buy rating was maintained. The closing price on the previous trading day was 73,600 KRW.

On the same day, Jungwook Choi, a researcher at Hana Securities, stated, "The stock prices of major listed subsidiaries such as LG Chem, LG Household & Health Care, and LG Electronics have fallen significantly, reducing the equity value. The upcoming IPO of LG CNS was also considered, as the confirmed offering price was below the over-the-counter trading price, lowering the equity value compared to before."

LG's preliminary operating loss for the fourth quarter of last year is expected to be 219.4 billion KRW. Researcher Choi said, "Due to the poor performance of subsidiaries, both consolidated net profit and separate operating cash flow are estimated to have fallen significantly short of market average forecasts. This inevitably leads to a decrease in LG's equity-method income and trademark revenue."

Regarding LG CNS, which is scheduled to be listed on the KOSPI on the 5th of next month, he said, "The general public subscription was successfully completed with a competition rate of 123 to 1. The confirmed offering price was set at 61,900 KRW, the top end of the desired price range (market capitalization of 6 trillion KRW)." He added, "Among existing LG shareholders, there will likely not be many who invested in LG solely based on LG CNS's growth potential, so the impact on LG's stock price will be minimal."

The policy to expand shareholder returns through improved dividend policy is a positive factor. In November last year, LG announced a plan to enhance corporate value by raising the minimum dividend payout ratio from 50% to 60%, a 10 percentage point increase, and adding interim dividends. The approximately 500 billion KRW worth of treasury shares purchased so far will be canceled by next year, and the 49,828 common shares and 10,421 preferred shares already held will also be fully canceled with shareholder meeting approval.

Researcher Choi said, "Considering securing funds for shareholder returns, additional treasury share purchases are expected around next year." He added, "Although there may be market concerns about securing dividend funds due to the subsidiaries' performance being significantly worse than expected last year, LG plans to expand dividends through improved dividend policy and increasing stakes in major subsidiaries such as LG Electronics and LG Chem."