LG Electronics share price surges on strong Q3 earnings outlook

2023.09.14 13:12:02 | 2023.09.14 13:14:47

[Photo by Han Joo-hyung]이미지 확대

[Photo by Han Joo-hyung]

Despite concerns about sluggish global demand for appliances, LG Electronics saw its stock price surge by 5.25 percent on Wednesday as it received optimistic forecasts for its third-quarter performance.

Trading volume for the Korean home appliance giant on Wednesday increased by over three times compared to the previous trading day, with a strong influx of “buy” orders. Kiwoom Securities estimated that LG Electronics’ non-consolidated third-quarter operating profit excluding LG Innotek could hit 657.4 billion won ($495 million), an impressive 111 percent increase compared to a year ago.

While the recovery in demand for key product categories has been slow, LG Electronics is expected to maintain profitability thanks to its robust product competitiveness and cost-cutting efforts.

This is good news for the company as it anticipates a significant increase in cash holdings. LG Electronics is estimated to have an operating cash flow of 6.31 trillion won this year, roughly double the amount versus the previous year.

Kiwoom Securities maintains its target price for LG Electronics at 150,000 won, indicating a potential additional increase of about 50 percent from the current stock price. LG Electronics is well-regarded for its consistent profit generation in its core home appliance business, leveraging its strong brand power to expand market share in both premium and budget segments. The company’s heating and cooling system products have also achieved remarkable success in the European market.

In the rapidly growing automotive components sector, LG Electronics is estimated to achieve a revenue growth rate of 28 percent this year, the highest among all its business segments. The company’s new factory in Mexico for auto part production is expected to commence full-scale operation in the fourth quarter. LG Magna e-Powertrain formed in July 2021 as a joint venture between LG Electronics and its auto part business partner Magna, is building a factory in Hungary, which is expected to enhance the venture’s competitiveness in securing related contracts in the European market.

By Cha Chang-hee and Minu Kim

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