NH Investment & Securities said on the 8th that LG Electronics is expected to secure growth drivers through new businesses such as artificial intelligence (AI) data center–related operations and robot parts. It maintained its "Buy" investment opinion and raised the target price to 135,000 won from 125,000 won. The previous trading day's closing price of LG Electronics was 107,100 won.
In the first quarter of this year, LG Electronics' results were led by the media entertainment (MS) unit, which handles TVs and laptops, and the vehicle component solutions (VS) business unit.
In the first quarter of this year, LG Electronics' MS division posted revenue of 5.2 trillion won, up 5% year over year, with an operating margin of 7.2%. The VS division recorded revenue of 3.1 trillion won, up 8% year over year, with an operating margin of 6.2%.
On this, analyst Hwang said, "The MS business division benefited from back-to-school demand and reductions in fixed costs such as labor, which helped improve profitability," adding, "The VS division reflected a better mix centered on highly profitable infotainment (IVI) and favorable currency effects."
By contrast, there were also negative effects from the deteriorating macro environment. The eco solution (ES) division, which oversees the heating, ventilation and air conditioning (HVAC) business with a high share in the Middle East and Africa, delivered weak results due to worsening economic indicators such as exchange-rate fluctuations and oil prices.
Hwang assessed that although LG Electronics' stock price has recently faltered amid this deterioration in the macro environment, catalysts for a future rise remain. "Although the stock has been moving sideways due to recent macro issues, factors for a multiple re-rating still exist," Hwang said.
Hwang cited cooling solutions for AI data centers and robot components (actuators) as future growth drivers for LG Electronics.
Hwang explained, "Certification for AI data center cooling solutions typically takes one to two years, and the certification process that began last year is proceeding smoothly," adding, "Also, based on the capabilities of the existing parts business division, momentum for the robot actuator business is expected to gradually strengthen."