Korea Investment & Securities projected on the 2nd that LG H&H's second-quarter performance will fall short of market expectations (consensus). While profitability in the Chinese business has somewhat improved, overseas business performance in regions excluding China has been somewhat sluggish compared to competitors, and it is still considered too early to establish a bottom.
LG H&H is expected to generate 1.7418 trillion won in revenue and 125.9 billion won in operating profit for the second quarter. These figures represent decreases of 1% and 20.6%, respectively, compared to the same period last year. They are also 11.8% lower than the consensus.
By institutional sector, the operating profit of the beverage division is expected to decrease by 3.5% to 50 billion won due to sluggish performance in the convenience store channel. The cosmetics division is also projected to fall short of the consensus due to marketing expenditure in preparation for the shopping season in the second half of the year.
Despite better-than-expected profitability in the Chinese business, second-quarter profitability is expected to fall short of the first quarter. The U.S. business succeeded in a turnaround from the second to fourth quarter last year, but returned to an operating loss in the first quarter. It is analyzed that this trend is likely to continue into the second quarter.
Kim Myung-joo, a researcher at Korea Investment & Securities, noted, "It is still early to establish a bottom for LG H&H based solely on recovery expectations for the Chinese cosmetics industry," and "the investment opinion remains 'neutral.'"
He added, "While it is positive that the Chinese business, which recorded losses in the second half of last year, is generating revenue in the first half of this year, the recovery in sales is still disappointing," and "While a temporary short cover can be expected, structural growth momentum is necessary for a trend upward in stock prices."