SK Securities announced on May 19 that it has raised its target price for LG from 110,000 won to 140,000 won, citing improved performance from subsidiaries and ongoing expectations for additional shareholder returns. The firm maintained its investment opinion at 'buy.'
Choi Kwan-soon, a researcher at SK Securities, noted that while LG's consolidated performance was weak in the first quarter due to losses at LG Chem and a decline in rental income, a recovery is anticipated for the year based on profit improvements from major subsidiaries. He projected that LG's consolidated operating profit would increase by 65.5% year-on-year to approximately 1.5 trillion won.
Choi emphasized that the key drivers for this performance improvement include increased net income from LG Electronics and expanded equity method gains from LG Chem's return to profitability. He also highlighted the company's dividend payout ratio of 64.9% and stable dividend policy, making it attractive for investors due to its eligibility for separate taxation on dividend income.
Furthermore, he mentioned that LG plans to retire 2% of its treasury shares in the first half of this year and currently holds 1.3 trillion won in cash and cash equivalents, reinforcing expectations for additional shareholder returns. Choi indicated that if plans for utilizing the cash after the share buyback are clarified, there could be further re-rating potential.
Choi also pointed out that LG's AI research institute has confirmed its competitiveness through a government-led foundation model project, which is a positive long-term outlook factor. He noted that the current price-to-book ratio (PBR) stands at only 0.6, indicating both valuation attractiveness and downside stability.
* This article has been translated by AI.
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