Shinhan Investment Corp. on July 30 raised its target price for LG Household & Health Care from 279,000 won to 335,000 won, citing continued growth in overseas sales, particularly in North America, and an improvement in performance. The firm also upgraded its investment recommendation to 'buy.'
Park Hyun-jin, a researcher at Shinhan Investment, stated, "The growth rate of overseas sales, centered on North America, achieved an earnings surprise for the second consecutive quarter. We expect a clear performance turnaround based on the recovery of domestic profits due to the revival of duty-free channels and increased export demand in North America."
For the second quarter of this year, LG Household & Health Care reported consolidated sales of 1.6574 trillion won and operating profit of 102.8 billion won, marking increases of 3.3% and 87.5%, respectively, compared to the same period last year. The operating profit significantly exceeded Shinhan Investment's estimate of 63.8 billion won and the market consensus of 75.2 billion won. Even excluding a 15 billion won customs refund from the U.S., the results surpassed market expectations.
By business segment, cosmetics sales rose by 4%, household goods by 5%, and beverages by 1%, indicating growth across all divisions. The cosmetics segment turned profitable with an operating profit of 44.4 billion won, while the operating profit for household goods increased by 23%. However, the beverage segment saw a 15% decline in operating profit due to cost pressures.
Regionally, North American sales surged by 47% year-on-year, driving overall growth. Domestic sales, as well as sales in China and Japan, saw declines of 1%, 5%, and 1%, respectively, but the extent of the declines was reduced. Notably, the expansion of online and offline export demand for the hair care brand 'Dr. Groot' was identified as a key factor in North American growth. The share of Dr. Groot's cosmetics sales rose to 8%, and additional revenue growth is anticipated with the upcoming entry into all North American Sephora stores in the second half of the year.
Park added, "While there may be increased marketing expenses and rising raw material costs in the third quarter, the improvement in profit margins due to channel mix enhancement will continue. We have raised our 2026 net profit estimate by 20%, leading to a 20.1% increase in the target price."
* This article has been translated by AI.
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