By Jun Ji-hye
Securities firms have been cutting their target prices for LG Group's affiliates, saying there won't be any big problems in their performances for the short term, but calling into question their future growth potential.
Korea Investment & Securities lowered its target price for LG Household & Health Care to 1.42 million won ($1,250) from 1.6 million won, Oct. 19, while KB Securities cut its target price for LG Display to 24,000 won from 28,000 won, Oct. 17.
Hana Financial Investment lowered its target price for LG Innotek to 175,000 won from 190,000 won, Oct. 12.
Korea Investment & Securities said LG Household & Health Care's operating profit increased by 34 percent in 2015 and 29 percent in 2016, but the rate of increase is expected to slow this year and next year.
“The company's operating profit is expected to rise by 14 percent this year and 11 percent next year,” said Na Eun-chae, an analyst from Korea Investment & Securities. “The rate of increase in its performance is expected to slow, and at the same time, the firm has failed to post meaningful growth in monthly sales at duty free shops in Korea and exports.”
KB Securities raised uncertainty for the improvement in LG Display's performance, citing the firm is expected to make new investments for manufacturing lines.
Kim Dong-won, an analyst from KB Securities, said LG Display is expected to operate a new product line at its plant in Paju, Gyeonggi Province, to supply plastic OLED panels targeting the North American market in the latter half of next year as well as the foldable smartphone market which is expected to be expanded in 2020.
“The share price of LG Display has decreased by 11 percent for the past month due to uncertainty for small- and medium-sized OLED panels and falling prices of LCD panels,” he said.
Hana Financial Investment lowered its forecast for LG Innotek's earnings, citing concerns over sluggish sales of iPhone XS and XS Max.
Kim Rok-ho, an analyst from Hana Financial Investment, said, “LG Innotek now needs to think about its medium-term growth outlook.”
With target prices for LG affiliates decreasing, market expectations toward the conglomerate's holding company, LG Corp., are also decreasing.
Daishin Securities cut its target price for LG Corp. to 84,000 won from 103,000 won.
“There seems to be a lack of power to increase net asset value (NAV),” said Yang Ji-hwan, an analyst from Daishin Securities, raising uncertainty for the performances of the group's affiliates for chemistry, electronics and cosmetics from the fourth quarter to next year.
According to Daishin Securities, LG Chem accounts for 26.4 percent of the group's NAV, while LG Household & Health Care accounts for 20.1 percent and LG Electronics for 12.3 percent.