[Click eStock] "LG Electronics to Enter Profit Growth Phase This Year... Target Price Raised"

Target Price Raised from 110,000 Won to 125,000 Won

On January 2, NH Investment & Securities announced that it expects LG Electronics to enter a profit growth phase starting this year, and accordingly raised its target price from 110,000 won to 125,000 won. The investment opinion remains 'Buy'.

Hwang Jihyun, a researcher at NH Investment & Securities, explained, "The upward revision of the target price is due to a reduction in the valuation discount rate," adding, "While overall performance had been sluggish due to tariff burdens and deteriorating results in the Media Solutions (MS) division, we expect LG Electronics to enter a profit growth phase this year thanks to strengthened responses to tariff impacts and structural improvements in its business fundamentals." She further stated, "If positive factors such as visible achievements in the data center HVAC (heating, ventilation, and air conditioning) business, materialization of the robotics business, and strengthened shareholder return policies emerge in the future, the discount rate could be eliminated altogether."

In particular, the HVAC business is analyzed to increase the likelihood of winning contracts from big tech (major information technology companies) clients, as it offers cooling solutions that combine air-cooled and water-cooled systems. Hwang noted, "While local cooling solution providers have an advantage in the construction of artificial intelligence (AI) data centers in the United States, if data centers expand to regions outside the US in the future, opportunities for LG Electronics are likely to increase even further."

This year, a rebound in performance is expected. Hwang stated, "With the upward revision of earnings estimates for LG Innotek, LG Electronics' consolidated results are expected to exceed previous estimates, but on a separate basis, the estimates are maintained as the costs of voluntary retirement are reflected." She added, "Although short-term sluggish performance is inevitable, the company has become structurally more resilient to fixed costs, making a performance rebound highly likely this year."

Meanwhile, the US Pending Home Sales Index for November was 79.2 (up from 76.7 the previous month), marking the highest level since February 2023. The number of sales also increased by 3.3% from the previous month (compared to a 2.4% increase in the previous month), showing signs of a real estate market recovery amid stable mortgage rates. Hwang commented, "This serves as an indicator supporting a steady recovery in the US home appliance market, suggesting that both stock price and performance have secured downside rigidity."