The stock prices of LG Group’s affiliates are on the decrease under its new chairman Koo Kwang-mo. This is largely due to poor performances of its major units, such as LG Electronics Inc. and LG Display Co.
The price of LG Electronics shares dropped 4.03 percent to 69,000 won (US$61.39) on the main KOSPI bourse on September 18, hitting a new 52-week low. LG Electronics’ stock price fell to below 70,000 won (US$62.28) for the first time after August last year. The intensifying competition in the television market, which is the company's core business, and poor performance in the vehicle component business, which has been promoted as a new growth engine of the group, are considered the main causes of the drop in stock prices.
Shinyoung Securities Co. recently estimated that LG Electronics’ operating profit in the third quarter would decrease 6 percent to 727 billion won (US$646.8 million) compared to the same period last year. The figure is lower than the previous estimates of 792 billion won (US$704.63 million) and the market estimates of 803.4 billion won (US$714.77 million). Lee Won-sik, an analyst at Shinyoung Securities, said, “LG Electronics’ MC business division has seen its deficits shrink as scheduled and it still has strong competitiveness as a premium home appliance producer so we still maintain an investment opinion of “buy” and a target price of 100,000 won (US$88.97). However, we recommend to pursue a trading strategy within the box pattern for a while considering the fact that the high-end TV market becomes more competitive and it is unclear when the VC business division will turn into profit-making.”
The price of LG Display shares also went down 0.25 percent to 19,650 won (US$17.48) on the same day, falling below 20,000 won (US$17.79) for the first time in two months after June 17. The stock price of LG Corp., which is closely connected with its affiliates’ performance, closed at 71,600 won (US$63.70), down 0.14 percent. The share price of LG Display and LG Corp. dropped 34.28 percent and 21.31 percent, respectively, compared to the end of last year.
The securities industry said new Chairman Koo’s unproven management ability and the spin-off of subsidiaries to be carried out at the end of this year after the resignation of LG Vice Chairman Koo Bon-joon are factors that raise uncertainties on LG Group. Jeong Dae-ro, an analyst at Mirae Asset Daewoo Co., said, “Considering the drop in equity value of subsidiaries such as LG Electronics and LG Chem, we lowered LG’s target stock price from 120,000 won (US$106.76) to 100,000 won (US$88.97).”