LG Household off more than 60% from last year’s peak, leading the Korean bluechip crash

2022.05.13 11:27:31 | 2022.05.13 11:32:35

[Photo by MK DB]이미지 확대

[Photo by MK DB]

Blue-chip stocks are crashing in South Korea amid unfazed foreign and institutional selloff with earnings disappointments losing faster.

LG Household & Healthcare (LG H&H), which used to be the most expensive stock in Korea, has been testing 52-week lows. Its shares lost additional 1.59 percent to 680,000 won ($530) in early trading on Friday.

From its peak of 1.78 million won in July last year, LG H&H shares have lost 61.3 percent.

The company’s hot earnings streak for multiple years came to abrupt stop this year.

On Wednesday, the company shocked the market with disappointing first-quarter earnings. Its operating profit amounted to 175.6 billion won, down 52.6 percent from the previous year and 48 percent below market consensus, while sales were down 19.2 percent to 1.64 trillion won.

The stock suffered greatly from profit-taking by institutions.

Foreigners sold 648 billion won worth of LG H&H shares since January, while institutional investors sold 75 billion won. The short selling balance to trading value also soared to 30 percent.

The beauty giant bore the brunt from Chinese lockdown.

It lost 32 percent and 68 percent in sales in the Chinese market and duty-free business in the first quarter.

“China’s zero-tolerance policy and following logistics problems dragged its sales in China and duty-free markets. Its operating profit also narrowed due to price hikes in raw materials,” said Kim Myung-joo, a researcher at Korea Investment & Securities.

After the poor earnings report, 16 securities firms downgraded the target stock price of LG H&H, with Samsung Securities slashing its target price nearly by half from the previous 1.15 million won to 630,000 won.

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Other growth and blue-chip stocks have also tanked as investors have turned bearish about overall stock investment in the tightening environment.

Earnings will be a key factor in deciding stock investment for a while as the current tightening environment would weigh on most companies’ businesses, said Lee Kyeong-soo, a researcher at Hana Financial Investment.

Shares of CJ ENM, Korea’s major entertainment firm under CJ Group, slid 12.3 percent to hit a 52-week low on Thursday after it announced its weak first-quarter results on the same day. Its operating profit decreased 47 percent on year, with net profit down 96.7 percent. An increase in content production cost was the main reason for the downbeat result. CJ ENM shares added 1.25 percent to 105,500 won in the early session on Friday.

Pearl Abyss shares lost 6.1 percent on Thursday immediately after it announced its operating profit in the January-March period plunged 60.4 percent on year. Pearl Abyss shares on Friday traded 1.74 percent higher at 58,500 won, recouping some loss.

By Cha Chang-hee and Jenny Lee

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]