2022E OP at KRW4.7tn (+21% YoY)
The author is an analyst of KB Securities. He can be reached at jeff.kim@kbfg.com. -- Ed.
Maintain BUY, target price of KRW160,000
We maintain BUY and 12m TP of KRW160,000 for LGE. For the year, B2B businesses (i.e., VS, BS) should see earnings improve, but HE is likely to see earnings fall with consumer spending on B2C products declining amid macro uncertainty (i.e., China’s lockdown, soaring inflation, prolongation of Russian-Ukraine war). HE profit margins are bound to decline, as the global TV market should suffer from shrinking demand in Europe and North America as well as intensifying price competition fueled by a competitor’s attempt to boost market share. In contrast, VS should turn profitable thanks to a healthy order book since 2019; quarterly revenue should top KRW2tn from 2Q22. Also, BS profit margins should improve significantly on the suspension of PV module business and improvement in product mix (tilting toward high value-added products).
2Q22E OP at KRW859.7bn (-2% YoY)
We believe 2Q22 earnings will fall short of the market consensus on declining OPM at H&A (9.6% in 2Q21→5.8% in 2Q22E) and HE (8.2% in 2Q21→2.7% in 2Q22E). We estimate 2Q22 consolidated revenue of KRW20.0tn (-5.5% QoQ, +16.6% YoY) and OP of KRW859.7bn (-54.3% QoQ, -2.1% YoY; 4.3% OPM). In terms of divisional OP, we see H&A at KRW462.2bn, HE at KRW110.7bn, VS at KRW2.2bn and BS at KRW83.4bn.
2022E OP at KRW4.7tn (+21% YoY)
Despite waning B2C demand, LGE profit margins should improve thanks to H&A’s growing North American market share and B2B businesses’ earnings improvement. VS should turn profitable with quarterly revenue topping KRW2tn; we estimate 2022/2023 VS revenue of KRW8.7tn/KRW10.2tn (+20.4% YoY/+18.3% YoY) and OP of KRW12.5bn/KRW143.4bn (0.1% OPM/1.4% OPM). Overall, we forecast 2022 revenue/OP at KRW82.6tn (+10.6% YoY)/KRW4.7tn (+21.1% YoY; 5.7% OPM) with revenue up across the board (excl. HE).