[Click e-Stock] "LG Household & Health Care Needs Structural Growth Momentum"

On July 2, Korea Investment & Securities analyzed that while it is positive that LG Household & Health Care's local business in China, which recorded a loss in the second half of last year, generated profits in the first half of this year, the recovery in sales remains disappointing. The firm stated that structural growth momentum is necessary for a sustained upward trend in the stock price. The investment rating was maintained as 'Neutral'.

LG Household & Health Care's sales in the second quarter were estimated at 1.7418 trillion won (down 1.0% year-on-year), with an operating profit of 125.9 billion won (down 20.6%), which is expected to fall short of market expectations by 11.8%. The beverage division is projected to post negative growth due to sluggish performance in the convenience store channel, and the cosmetics division is also expected to underperform market expectations as a result of proactive marketing expenses in preparation for the shopping season in the second half of the year.

Kim Myungjoo and Jeon Yoona, analysts at Korea Investment & Securities, stated, "While the profitability of LG Household & Health Care's China business in the first quarter was better than market expectations, profitability in the second quarter is likely to be less impressive than in the first quarter." They added, "The U.S. business (LG H&H brands and acquisitions), which succeeded in turning around in the second to fourth quarters of last year, also posted an operating loss in the first quarter of this year, and this trend is likely to continue in the second quarter."

Recently, LG Household & Health Care signed a contract to acquire the LG Pra.L brand, a beauty device brand from LG Electronics. The two analysts pointed out, "Competition in the domestic beauty device market is fierce, so it will be difficult for LG Household & Health Care to achieve significant results in the domestic market in the short term." They added, "It is necessary to watch whether the company can achieve results through overseas sales of devices, as competitors have done."