Hankook Securities projected on September 22 that LG's improved performance from its subsidiaries and expanded shareholder returns could lead to a revaluation of its stock. The firm maintained a 'buy' rating and a target price of 150,000 won, indicating a potential upside of 34.8% from the previous closing price of 111,300 won on September 21.
Park Jong-ryul, a researcher at Hankook Securities, stated, "The strong performance of equity-method subsidiaries and the low base effect from last year suggest significant profit growth in the second half of the year. A revaluation of the stock through expanded shareholder returns is also possible."
For the third quarter, LG's consolidated revenue is expected to reach 21 trillion won, a 6.6% increase from the same period last year, while operating profit is projected to rise by 4.8% to 4.392 trillion won. Analysts believe that the strong performance of equity-method subsidiaries such as LG Electronics, LG Chem, LG Household & Health Care, and LG Uplus will significantly boost equity-method income. On a standalone basis, operating revenue is forecasted at 2.31 trillion won, with operating profit at 1.671 trillion won.
The annual performance improvement trend is also expected to gain momentum. Hankook Securities forecasts that LG's consolidated revenue for the year will increase by 14.3% year-on-year to 82.91 trillion won, with operating profit expected to rise by 66.3% to 15.17 trillion won. Following a turning point in the second quarter, the consolidated operating profit is anticipated to continue its upward trend into the third quarter, with the low base effect from last year further contributing in the fourth quarter.
Hankook Securities also expects that the high growth of LG CNS and the recovery of performance from consolidated subsidiaries will support dividend income and improvements in equity-method income. The stable profit generation from electronics, telecommunications, and service subsidiaries, along with a gradual recovery in the previously underperforming chemical sector, is also anticipated.
Strengthening shareholder returns is seen as another factor for stock revaluation. LG has completely retired 3.9% of its treasury shares and raised its minimum dividend payout ratio from 50% to 60% based on adjusted net income. The company has also implemented an interim dividend in September, indicating that its shareholder return policy has moved into the execution phase.
Park noted, "LG is proving its commitment to shareholder returns through action, not just declarations," adding that the recent decline in stock prices has resulted in a discount rate of 51.9% compared to net asset value (NAV), with a 12-month forward price-to-book ratio of 0.6, indicating that the stock remains undervalued.
* This article has been translated by AI.
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