[Click e-Stock] "LG Electronics: Short-Term Weakness, Mid- to Long-Term Growth Drivers Remain Intact"

Hana Securities stated on June 27 that LG Electronics is expected to post weak results for the second quarter. However, the company maintained its "Buy" investment rating and target price, citing that LG Electronics' mid- to long-term growth drivers remain intact.

LG Electronics is projected to record consolidated sales of 20.8532 trillion won and operating profit of 747 billion won in the second quarter. These figures represent a 4% and 38% decrease, respectively, compared to the same period last year.

Kim Minkyeong, an analyst at Hana Securities, said, "We have revised down the operating profit forecast for the Home Solutions (HS) division by 34%. The main reason is the weakening demand for home appliances due to economic downturns in advanced markets such as North America and Europe." She added, "TV and air conditioner sales volumes are also believed to be below average levels, and due to the weak won-dollar exchange rate in the second quarter, operating profits of consolidated subsidiaries are also expected to be sluggish."

Kim also noted, "It is positive that the Vehicle Solutions (VS) division continues to show stable performance based on IVI orders." She continued, "Although the business environment is expected to remain challenging in the second half of the year due to the resumption of U.S. government tariffs, logistics cost pressures are likely to ease as the ocean freight index declines."

However, she maintained that new high-profit businesses such as HVAC, WebOS, and home appliance subscription services will continue to serve as LG Electronics' mid- to long-term growth engines.

Kim said, "As the domestic and overseas data center markets expand in the future, the proportion of chillers within the Energy Solutions (ES) division is also expected to gradually increase." She added, "The home appliance subscription business, which has been recording high annual growth rates of 20-30%, is also expected to contribute more to earnings as service areas expand going forward."

Based on these factors, Kim maintained LG Electronics' target price at 129,000 won.

Kim explained, "LG Electronics appears to be maintaining a solid market share in the high-end segment. When the global economy recovers, including a rebound in housing demand in advanced markets such as North America and Europe, the company is expected to continue its growth based on differentiated product competitiveness." She added, "As the Indian stock market enters a recovery phase, momentum for an IPO in India is also expected to become more prominent in the second half of the year."