Samsung Securities said on the 30th that the gap with indie brands is widening for LG H&H. It maintained a 'neutral (Hold)' investment opinion and lowered the target price from 340,000 won to 290,000 won. The closing price of LG H&H on the previous trading day was 325,000 won.
Samsung Securities assessed that LG H&H is struggling to keep pace with the rapid growth of indie brands. It also noted that the beverage business, which has played a stable cash cow role, is seeing stagnation in profit margins.
Lee Ga-young, a researcher at Samsung Securities, said, "It seems that a strategy capable of overcoming the marketing know-how that has driven the rapid growth of K-indie brands in the Western market has not yet been established," adding, "If there is no strategic reversal, it will be difficult to reverse market share for the time being."
Sales in the Chinese market are also struggling. Sales to China account for 41% of total cosmetics sales. This researcher said, "Second-quarter sales in China are expected to decrease by 15% compared to the same period last year," and noted, "While a strategy is being sought to strengthen local presence in China by reducing the volume handled by middlemen to enhance price control, the problem is that local sales in China are not growing enough to compensate for the duty-free performance."
It was further analyzed that profitability in the newly targeted U.S. market is still low. This researcher explained, "There are no cosmetics brands from LG H&H that have gained popularity compared to other K-beauty brands, like the household item Dr. Groot," adding, "(Rather) it is passing through a phase of declining profitability due to increased marketing investments."