LG Electronics Stumbles in Q4, Set to Rebound Next Year [Click e-Stock]

Operating Profit Expected to Return to Growth Next Year
First Increase in Three Years Projected

LG Electronics is expected to post weak results in the fourth quarter of this year due to the reflection of voluntary retirement costs. However, on a separate basis, the company is projected to return to profit growth for the first time in three years starting next year, and company-wide restructuring efforts are also underway.

On the 17th, Meritz Securities raised its target price for LG Electronics by 4.3% to 120,000 won, citing these factors. The investment rating of "Buy" was also maintained. The previous day's closing price was 93,100 won.

The company’s consolidated earnings for the fourth quarter are expected to show sales of 23.6189 trillion won and operating profit of 23.8 billion won. Compared to the same period last year, sales are projected to increase by 3.7%, but operating profit is expected to decrease by 82.5%. This performance exceeds the consensus operating loss estimate of 18.2 billion won, which is attributed to the strong performance of LG Innotek, its consolidated subsidiary.

However, on a separate basis, the deficit is expected to expand significantly to 374.7 billion won. This is the result of one-off costs related to voluntary retirement coinciding with the seasonal off-peak period. Excluding approximately 300 billion won in voluntary retirement costs, the performance is expected to improve slightly year-on-year due to better results in the Vehicle Solutions (VS) division.

For next year, separate sales are projected at 69.5565 trillion won and operating profit at 2.6063 trillion won, up 3.0% and 40.0%, respectively, compared to this year’s expected results. This would mark the first profit increase in three years. With voluntary retirement costs reflected in the second half of this year, fixed costs will decrease from next year, and a declining freight rate index is also expected to create a favorable environment for profitability. Expansion of market share in emerging markets such as India and Latin America, along with the effect of price increases reflecting U.S. tariffs, are expected to gradually be reflected in the results. Company-wide restructuring based on the growth of new businesses, such as subscription-based home appliances, is also underway.

Yang Seungsoo, a researcher at Meritz Securities, explained, "As the weak fourth-quarter results have already been priced into the stock, it is important to focus more on the potential for profit growth next year, the cash reserves secured through the listing of the Indian subsidiary for new business M&A, and the establishment of a foundation for the humanoid business, rather than short-term performance."