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(Photo= Yonhap news) |
[Alpha Biz= Reporter Kim Sangjin] Yuanta Securities expects LG to turn around from the second quarter on the back of improved performance by its subsidiaries.
Yuanta Securities predicted on the 24th that LG will turn around on the back of its subsidiaries' earnings improvement from the second quarter. It maintained its target stock price of KRW 120,000 and its investment opinion 'buy'.
Consolidated sales in the first quarter of this year were 1.6 trillion won, down 1.5% from a year earlier. Operating profit was 422.6 billion won, down 16.3% from the previous year, below the consensus. LG Chem's poor performance led to a drop in equity profit and loss, and a temporary drop in profitability of its consolidated subsidiary LG CNS is cited as the reason for its poor performance.
However, it is predicted that LG will turn around from the second quarter.
"LG CNS's operating profit will recover to a normal level considering that the impact of the increase in some project costs was temporary," said Yuanta Securities Co. "Its annual operating profit ratio will remain in the 8 percent range as stable performance centered on smart factories and new businesses such as smart cities and artificial intelligence (AI) are also growing."
It is estimated that consolidated sales in the second quarter of this year will reach 2.1 trillion won, up 12.1 percent from a year earlier, and operating profit will increase 33.8 percent to 608.3 billion won.
"Expectations for shareholder returns are also valid," Yuanta Securities said. "As of the end of the first quarter of this year, about 81% of the acquisition of treasury shares worth KRW 500 billion will be completed as early as the third quarter, and there is a possibility of retirement."
Yuanta Securities added, "The available cash also reaches 1.6 trillion won, so additional shareholder returns can be expected."
AlphaBIZ Kim SangJin(letyou@alphabiz.co.kr)
