Kiwoom Securities said on the 1st that LG hit a record high in net asset value (NAV) on the back of gains in subsidiary share prices. It maintained a Buy rating and raised the target price to 200,000 won. LG's previous closing price was 146,600 won.
Recently, as the share prices of key subsidiaries such as LG Electronics and LG CNS rose, LG's NAV hit a record high of 37.5 trillion won. The NAV discount rate is 40%, down 5 percentage points from 45% at the end of the previous year.
Ahn Young-jun of Kiwoom Securities said, "Recently, group companies' share prices have risen as growth potential in new businesses such as AI and robots has come to the fore," adding, "As a holding company, LG can be expected to benefit directly from the heightened visibility of the group's new-business capabilities, in addition to NAV increasing thanks to subsidiary share-price gains."
The reasons cited were: ▲ LG AI Research Institute, which develops AI models, is an organization under LG Management Development Institute, in which LG holds 100% equity ▲ as a pure holding company, it is expected to have a high likelihood of executing direct investments in new businesses.
Earlier, EXAONE, an AI model developed by LG AI Research Institute, ranked first in the first evaluation on Jan. in the national project for the independent AI foundation model project ("national AI"). With the second evaluation scheduled for Aug., the institute's capabilities in AI model development are expected to be highlighted again.
Ahn said, "The rise in the value of LG AI Research Institute is highly likely to translate directly into an increase in LG's corporate value due to the equity structure," adding, "Upstage, an AI model developer that passed the first evaluation alongside LG, is preparing for an IPO with a target corporate value of 3.5 trillion won to 5 trillion won."
He also added that in periods of expanding new-business capabilities, large-scale investments are needed, and such investments are more efficient when centered on a holding company than on an operating company.
Ahn said, "As of the end of the first quarter this year, LG holds 1.3 trillion won in cash and cash equivalents, and the company can look forward to new investments in new businesses and the resulting expansion in growth potential."