Korea Investment & Securities predicted on the 7th that LG Household & Health Care's operating profit for the fourth quarter of last year will fall short of market expectations by 15.4%. The investment opinion is maintained as 'neutral,' and no target stock price was given. The closing price of LG Household & Health Care's previous trading day was 312,000 won.
Korea Investment & Securities projected LG Household & Health Care's consolidated sales for the fourth quarter of last year to increase by 4.6% year-on-year to 1.6389 trillion won. During the same period, the operating profit was estimated to decrease by 3% year-on-year to 53.1 billion won. While the sales amount aligns with market expectations, the operating profit is below market expectations by 15.4%.
Kim Myung-joo, a researcher at Korea Investment & Securities, noted, "Despite the slow recovery of the Chinese cosmetics industry, LG Household & Health Care continued promotions due to events like Singles' Day, and as a result, the company's business in China is estimated to have recorded an operating loss in the fourth quarter following the third quarter." He added, "Sales in the duty-free channel also decreased compared to the third quarter, and the operating profit of the beauty sector in the fourth quarter is expected to remain at 11.2 billion won, which is not an improvement from the third quarter."
As domestic economic sluggishness continued in the fourth quarter of last year, the sales trend of distribution channels was also poor. Research Institute Kim projected, "Accordingly, the operating profit of the beverage institutional sector that supports LG Household & Health Care's performance is expected to continue declining in the fourth quarter following the third quarter."
In order to reduce its high dependence on the Chinese market, LG Household & Health Care began efforts to expand its business in the U.S. market from last year. Research Institute Kim noted, "LG Household & Health Care recorded its largest performance ever during last year's Amazon Black Friday," adding that "While the recent good performance in the U.S. is positive, LG Household & Health Care's beauty sector still occupies a very small portion, making it difficult to be a point of investment for the company."
He added, "Even if the cosmetics industry recovers thanks to the Chinese government's economic stimulus in the future, it is expected that it will take time for LG Household & Health Care, a luxury brand company in Korea, to benefit from this."