[Edaily Reporter PARK MIN ] On the 14th, NH INVESTMENT & SECURITIES maintained its “Buy” rating on LG Corp. ( LG Corp.(003550)) and kept its target price at 135,000 won, citing expectations for enhanced medium- to long-term shareholder returns and investments in new businesses. Based on the previous day’s closing price, LG Corp.’s stock price stood at 113,700 won.
Lee Seung-young, an analyst at NH INVESTMENT & SECURITIES, stated in a report published that day, “Based on its net cash position and stable operating income, we expect expanded shareholder returns and investment in new businesses over the medium to long term,” adding, “The current stock price is trading at a 45.3% discount to net asset value (NAV).”
NH INVESTMENT & SECURITIES analyzed that LG Corp. held 1.2 trillion won in net cash as of the end of the second quarter and is securing stable annual operating income of approximately 900 billion won.
Based on this, the firm projected that LG would strengthen medium- to long-term shareholder returns and invest in new businesses such as artificial intelligence (AI) and enterprise software, biotech and healthcare, and cleantech and sustainability.
In particular, it was suggested that a portion of the funds secured from the sale of the Gwanghwamun building could be used for shareholder returns. The company completed the cancellation of its 2.0% treasury stock holding last May.
LG Corp.’s standalone earnings are also expected to show a stable trend. NH INVESTMENT & SECURITIES projected this year’s standalone operating revenue at 899.4 billion won. This represents a 1.6% increase year-over-year, and the firm anticipates stable cash generation on a scale similar to last year.
In the new business sector, the expansion of LG Corp. AI Research’s artificial intelligence business is anticipated. LG Corp. AI Research unveiled K-EXAONE 2.0, with the number of parameters expanded from 236 billion in the previous 1.0 version to 750 billion. NH INVESTMENT & SECURITIES explained that the results of the second-phase evaluation for the company’s proprietary AI foundation model business are scheduled to be announced in August.
LG Corp.’s second-quarter consolidated revenue reached 2.1396 trillion won, a 19.0% increase year-over-year. Operating profit surged 92.5% to 533 billion won. The operating profit margin stood at 24.9%, up 9.5 percentage points from 15.4% in the second quarter of last year. Operating profit exceeded both NH INVESTMENT & SECURITIES’ previous estimate of 498 billion won and the market consensus of 432 billion won.
The key driver of this earnings improvement was the strong performance of affiliated companies. Second-quarter equity in earnings of affiliates reached 348.1 billion won, a 274.7% increase year-over-year. This improvement was driven by rising net income at major affiliates such as LGCHEM,LTD(051910)and LGELECTRONICS(066570). NH INVESTMENT & SECURITIES projected that annual equity in earnings of affiliates will improve as the recovery in their performance continues into the second half of the year.
This earnings growth is expected to continue over the medium to long term. NH INVESTMENT & SECURITIES projected LG Corp.’s consolidated revenue for this year at 8.5594 trillion won and operating profit at 1.7515 trillion won. Compared to last year, this represents an 18.0% increase in revenue and a 92.0% increase in operating profit.
For 2027, the firm forecasts revenue of 10.1854 trillion won and operating profit of 2.7973 trillion won, representing a 59.7% increase in operating profit compared to this year. In 2028, revenue is estimated to reach 11.6273 trillion won, with operating profit rising to 3.5907 trillion won.
Analyst Lee Seung-young stated, “Factors driving LG Corp.’s stock price upward include rising share prices of major subsidiaries such as LGELECTRONICS and LGCHEM,LTD, increased dividend income resulting from expanded shareholder returns at subsidiaries, and earnings growth at LG AI Research,” while citing a decline in the share prices of major subsidiaries or a reduction in dividend income due to deteriorating earnings as risk factors.