NH Investment & Securities stated that LG is expected to expand its long-term shareholder returns based on its net cash and stable operating income. The firm maintained a 'buy' rating and a target price of 135,000 won.
Lee Seung-young, a researcher at NH Investment & Securities, noted, "With 1.2 trillion won in net cash and stable annual operating income of around 900 billion won as of the second quarter, we anticipate an increase in long-term shareholder returns and investments in new businesses." Currently, LG's stock price is trading at a 45.3% discount to its net asset value (NAV).
This year, LG's standalone operating income is projected to reach 899.4 billion won, reflecting a 1.6% increase compared to the previous year, indicating a similar level to last year. The researcher suggested that some of the funds secured from the sale of the Gwanghwamun building will be utilized for shareholder returns, noting that LG retired 2.0% of its treasury shares in May.
LG's second-quarter results also exceeded market expectations. The company reported sales of 2.1396 trillion won, a 19.0% increase year-on-year, while operating profit surged 92.5% to 533.0 billion won. Equity method gains rose by 274.7% to 348.1 billion won, driven by increased net profits from major affiliates such as LG Chem and LG Electronics.
Lee added, "We expect the recovery of affiliate performance to continue in the second half, leading to improved annual equity method gains." However, the operating profit of LG CNS, a consolidated subsidiary, decreased by 9.2% year-on-year to 127.9 billion won due to delays in some project contracts and increased investments to secure future growth drivers.
Investment in new businesses is also expected to continue. The LG AI Research Institute recently unveiled 'K-EXAONE 2.0,' expanding its parameter scale from 236 billion to 750 billion. The results of the second phase evaluation of its proprietary AI foundational model are set to be announced later this month.
* This article has been translated by AI.
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