[Click eStock] "LG Saenghwal Geongang, Low Short-term Earnings Expectations"

Shinhan Investment Corp. maintained its Trading BUY rating and target price of 320,000 KRW for LG Household & Health Care on the 11th, stating, "The growth in cosmetics sales driven by China is positive, but it may be a short-term effect due to the brand renewal. Whether this growth is sustainable requires more time to evaluate." The stock has an upside potential of 3.4%.

On the same day, Hyunjin Park, a researcher at Shinhan Investment Corp., said, "Due to ongoing efficiency improvements such as The History of Whoo brand renewal and distribution channel optimization, the short-term earnings expectations are relatively low compared to similar companies."

He projected that the consolidated sales for Q1 would be 1.753 trillion KRW, and operating profit 139.9 billion KRW, representing a 1% increase and a 7% decrease respectively compared to the same period last year. By business segment, sales are expected to maintain the previous quarter's trend with household goods down 3%, cosmetics up 5%, and beverages up 1%.

Researcher Park pointed out, "Although it is a time to expect results from distribution channel adjustments and brand renewal, the intensity of changes will not be significant," adding, "Especially, the margin improvement points in the household goods and beverage segments are weak."

He anticipated that sales of The History of Whoo, the largest brand by sales volume, would increase within 10%. Overseas sales are expected to have grown by around 10% to 560 billion KRW. China is still showing single-digit sales growth, while meaningful increases in sales from North America and other regions were unlikely.

Park said, "The increase in sales centered on indie beauty low-priced brands is positive," but added, "Since cosmetics marketing expenses are expected to continue rising, it may be difficult for the margin rate in that segment to improve immediately."

He concluded, "The changes in earnings estimates are minimal, and the immediate expectations for earnings upgrades are low, limiting valuation attractiveness. However, due to low exposure to US-originated risks, it can be bought for defensive trading purposes."