Korea Investment & Securities Co. said on the 7th that LG Electronics' first-quarter operating profit this year will beat market expectations, backed by strong results at consolidation subsidiaries. It maintained its "Buy" investment rating and raised the target price to 140,000 won from 117,000 won. LG Electronics' closing price in the previous trading day was 109,400 won.
Park Sang-hyun, an analyst at Korea Investment & Securities Co., said, "The strong performance of consolidation subsidiaries, driven by solid smartphone sales at a North American client, is expected to offset difficulties in the core business."
This year's first-quarter consolidation operating profit for LG Electronics was projected at 1.484 trillion won. That is up 17.9% from a year earlier and was expected to swing to a profit from the previous quarter. This is 7.4% above the market consensus of 1.3819 trillion won.
The home appliance (HS) division's expected operating profit was analyzed at 632.3 billion won, likely swinging to a profit from the previous quarter. For the media and entertainment (MS) division, it was seen at 65.8 billion won, up 1,242.7% from a year earlier, also likely swinging to a profit.
Park said, "For the HS division, the environment is challenging due to weak appliance demand and tariff uncertainty, but profitability is expected to stay in the high-single-digit range thanks to cost savings and improved production efficiency," adding, "The MS division can turn profitable through workforce redeployment carried out in 2025 and more efficient execution of marketing expenses."
The first-quarter operating profit for the vehicle component solutions (VS) division was projected at 196.4 billion won, up 57% from a year earlier.
Park said, "Improved product mix from a higher revenue share of the higher value-added in-vehicle infotainment (IVI) business and rising utilization rates for electric vehicle parts are the main drivers of results," adding, "Higher fuel costs stemming from Middle East–related geopolitical risk could spur U.S. electric vehicle (xEV) sales."
The first-quarter operating profit for the heating, ventilation and air conditioning (ES) division was expected at 358.6 billion won, likely swinging to a profit from the previous quarter.
Park said, "We are at the outset of resolving the risks of earnings stagnation and a lack of new growth drivers, which had prompted multiple re-rating over the past three years," adding, "This year, along with an earnings rebound, new businesses related to heating, ventilation and air conditioning (HVAC) for data centers and robots are taking shape, so it is time to be mindful of the upside risk."