LG HelloVision
The author is an analyst for NH Investment & Securities. He can be reached at jaemin.ahn@nhqv.com -- Ed.
LG HelloVision is entering several new businesses (eg, rental, seasonal food market, and MVNO) to overcome the structural limitations for CATVs, but top-line growth remains difficult to predict for such efforts. Although its earnings are stable, momentum for a share price rebound is still weak.
Earnings remain stable
We adhere to a Hold rating and TP of W4,500 on LG HelloVision. Although its cash flow remains healthy thanks to stable business, the firm needs a change in direction or new momentum trigger to see a meaningful share price increase, as it is currently not among the market’s preferred growth stocks.
We forecast 2023 sales of W1.1tn (-3.7% y-y) and OP of 52.9bn (-1.7% y-y), expecting earnings to hold steady y-y.
1Q23 review: OP arrives tepid
LG HelloVision posted consolidated 1Q23 sales of W277.6bn (-2.8% y-y, -1.8% q-q) and OP of W11.7bn (-9.2% y-y, +18.8% q-q), with OP missing both our estimate of W13.6bn and the consensus of W14.8bn, affected by both sluggish CATV VOD sales and high-base effect stemming from one-off smart terminal sales for the Office of Education last year.
At the TV domain, 1Q23 sales totaled W134.4bn (-1.3% y-y, -1.1% q-q). Although stable subscriber trends continue, VOD sales are sliding due to user movement to OTT services and a lack of blockbuster content. Other business recorded 1Q23 sales of W67.4bn (-9.7% y-y, -4.4% q-q), impacted by y-y high-base effect from one-off sales of smart terminals for the Office of Education last year.
Debt declined, as W100bn of corporate bonds was repaid in 1Q23, and interest costs should narrow little by little from 2Q23. Marketing expenses totaled W5.4bn (-7.6% y-y, +0.7% q-q), remaining stable.