Hyundai Motor Securities analyzed on the 1st that LG H&H's weak profitability is inevitable in the second half of the year. The investment opinion remains at 'market perform (market return, neutral)' and the target stock price has been lowered from 340,000 won to 280,000 won. The previous day's closing price for LG H&H was 316,000 won.
Previously, LG H&H recorded an earnings shock with consolidated revenues of 1.6049 trillion won and operating profit of 54.8 billion won for the second quarter of this year. Revenues and operating profits decreased by 8.8% and 65.4%, respectively, compared to the same period last year.
Researcher Ha Hee-ji from Hyundai Motor Securities noted, "Sales in the cosmetics institutional sector decreased by 19.4% compared to the same period last year, and operating profit turned to a loss," adding that "the impact of restructuring focused on traditional domestic channels will become visible this quarter."
Performance was also poor in the household goods and beverage institutional sectors. In the household goods sector, second-quarter sales increased by 2% compared to the same period last year, but operating profit decreased by 7.1%. In the beverage sector, sales and operating profit decreased by 4.2% and 18%, respectively, compared to the same period last year.
Researcher Ha projected, "In the second half of the year, due to the restructuring of strong beauty businesses in traditional domestic channels and in China, along with expanded marketing expenses towards the U.S. and Japan, conservative revenue will be recorded."
He added, "As LG H&H decides to make extensive improvements to its beauty business to rebuild its growth base, it is expected that efficiency improvements in traditional channels and the China operations will occur, along with increased marketing expenses focused on key North American brands, leading to inevitable weak profitability in the second half of the year."