Hanwha Investment & Securities announced on November 4 that LG Household & Health Care's third-quarter performance fell short of market expectations, but noted continued growth of its own brands in the North American market, maintaining a 'buy' rating and a target price of 350,000 won.
Han Yu-jung, an analyst at Hanwha Investment & Securities, stated, "LG Household & Health Care's third-quarter revenue was 1.5774 trillion won, a 0.2% decrease compared to the same period last year, while operating profit rose 52.4% to 70.4 billion won." She explained that the operating profit was below the market forecast of 101.3 billion won due to losses recorded in North America and China.
However, she highlighted the ongoing growth of the company's own brands in North America. Despite a high comparative base from last year's Amazon Prime Day, online sales of Dr. Groot increased by 60% year-on-year. Sales of LG Household & Health Care's own brands also rose by 20%.
Revenue from the Chinese subsidiary decreased by 22.4% year-on-year to 92.5 billion won, as the company scaled back low-margin live broadcasts. Conversely, duty-free sales surged by 145.5% to 92.5 billion won, partially offsetting the decline in the Chinese subsidiary's revenue.
Hanwha Investment & Securities anticipates continued profitability improvements in the fourth quarter due to cost efficiency measures. They project fourth-quarter revenue to increase by 2.4% year-on-year to 1.5071 trillion won, with operating profit expected to turn positive at 13.4 billion won.
Han also noted the expansion of the North American brand portfolio. Dr. Groot has broadened its sales channels to include Costco and Sephora, while The Face Shop and Hince are also increasing their presence in major U.S. retail networks.
She analyzed, "The growth centered on online and multi-brand shops is reducing reliance on company-owned stores and in-house promotional staff, thereby lowering fixed sales costs."
Although Hanwha Investment & Securities revised its operating profit estimates downwards by 25.3% for this year and 12.3% for next year, it maintained its target price to reflect the adjustment in the performance outlook's reference point.
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.