[Click eStock] "LG Electronics, Forecasts Best Performance in 4 Years... Target Price Up"

Target Price Raised by 8% Compared to Previous Estimate

On the 17th, KB Securities raised the target price for LG Electronics from 120,000 KRW to 130,000 KRW, expecting the company to achieve its highest performance in four years this year. The investment rating was maintained as 'Buy.'

Dongwon Kim, a researcher at KB Securities, explained, "The upward revision of LG Electronics' target price is due to the forecast that this year's operating profit will increase by 20% compared to the previous year, reaching 4.1 trillion KRW, marking the highest performance in four years since 2021 (4 trillion KRW). In particular, the home appliances (H&A) operating profit is estimated to rise by 28% year-on-year to 2.6 trillion KRW, setting a new record for the highest performance in five years since 2020." He added, "The improvement in performance is driven by a sharp increase in premium home appliance sales centered on Asian countries such as India, Indonesia, and Malaysia, as well as significant improvement in the heating, ventilation, and air conditioning (HVAC) segment due to increased sales of data center cooling systems. Accordingly, we have raised our estimates for controlling shareholder net income for 2025 and 2026 by 29% and 23%, respectively, compared to previous forecasts."

The operating profit for the first quarter of this year is expected to exceed market expectations. Researcher Kim said, "The consensus for LG Electronics' first-quarter operating profit in January was 1.2 trillion KRW, an 8% decrease compared to the same period last year, anticipating a decline. However, due to a surge in high-value-added home appliance sales mainly in Asia, the estimate has been revised to 1.4 trillion KRW, exceeding the consensus by 12% and allowing for an increase compared to the previous year. The first-quarter home appliance operating profit is expected to increase by 18% to 1.1 trillion KRW, marking the highest performance in two years since the first quarter of 2023."

There is also an analysis that shareholder returns will expand due to the initial public offering (IPO) in India and the benefits from the tariff war. Researcher Kim stated, "It is estimated that 3 to 5 trillion KRW can be raised through the local listing of the Indian subsidiary in the second quarter. The funds raised from the Indian IPO are expected to be used for share buybacks and mergers and acquisitions (M&A) in the HVAC sector, meaning the Indian IPO will likely lead to expanded shareholder returns." He explained, "Even if only 20% of the 3 trillion KRW raised is used for share buybacks, the scale of share repurchases would be 600 billion KRW, with 7.45 million shares repurchased (4.6% of total issued shares), which is 14 times the average daily trading volume of LG Electronics this year (550,000 shares)." He added, "From April, due to the mutual retaliatory tariffs imposed by the United States and the European Union (EU), price increases for Whirlpool and Electrolux products are inevitable, so LG Electronics is expected to benefit from the tariff war."