Shinhan Investment & Securities said on the 30th that for LG H&H(051900), overseas sales growth centered on North America delivered another earnings surprise in the second quarter following the previous quarter, adding that a clear earnings turnaround is expected. It maintained a Buy rating and raised the target price by 20.1% to 335,000 won. The previous day's closing price of LG H&H was 263,000 won.
Shinhan Investment & Securities explained that for LG H&H, overseas sales growth centered on North America delivered an earnings surprise following the previous quarter. As demand for Korean indie beauty remains strong in the North American market, the hair brand Dr. Groot is driving sales growth.
Park Hyunjin, an analyst at Shinhan Investment & Securities, said, "With the recovery of the duty-free channel in the second half, domestic profit improvement is expected," adding, "A clear earnings turnaround is anticipated, mediated by export demand in North America."
LG H&H posted second-quarter sales on a consolidation basis of 1.66 trillion won, up 3% from a year earlier. Operating profit rose 88% from a year earlier to 102.8 billion won. Operating profit exceeded Shinhan Investment & Securities' estimate (63.8 billion won) and the consensus (75.2 billion won).
Park said, "Even after excluding the one-off revenue of 15 billion won from U.S. tariff refunds, results were strong."
By business division, sales rose 4% in cosmetics, 5% in household goods, and 1% in beverages, with all business divisions successfully returning to growth. Operating profit in the cosmetics division swung to a surplus at 44.4 billion won. In addition, the household goods division recorded 22.3 billion won and the beverages division 36.1 billion won, leading to the assessment that profits in cosmetics and household goods held up better than expected. However, in beverages, cost pressures persisted.
By region, North America grew 47%, driving overall growth. Park said, "The main reason for the strong sales in North America is increased online and offline export demand for Dr. Groot," adding, "Dr. Groot's share of sales within cosmetics surged rapidly to 8%."
Dr. Groot is set to enter all North American Sephora locations, and its sales contribution is therefore expected to increase further in the second half.
In particular, financial soundness and profit improvement were expected to continue.
Park said, "Marketing expenditure may increase in the third quarter and the burden from rising raw and subsidiary material prices could grow, but the profit improvement trend is expected to continue thanks to channel mix improvements," adding, "We raise our 2026 net profit estimate by 20%."