[Edaily Reporter Kwon Oh Seok ] HANWHA INVESTMENT & SECURITIES announced on the 25th that it is maintaining its “Buy” rating and target price of 350,000 won for LG H&H(051900).

Han Yu-jeong, an analyst at HANWHA INVESTMENT & SECURITIES, commented on the company’s disclosure the previous day (the 24th) that “LG H&H USA” had decided to transfer 100% of its stake in “The Avon Company” to “Stratford Worldwide” for approximately 8.4 billion won, stating: "Rather than focusing on the low disposal price of 8.4 billion won itself, we should take note of the fact that the company’s own brands have established themselves as a new pillar of its North American business—enough to allow it to boldly divest Avon, which has the largest revenue among its U.S. consolidated subsidiaries on a single-entity basis," she explained.
Previously, in April 2019, the company signed an agreement to acquire 100% of “New Avon LLC” (now The Avon Company) for approximately 145 billion won. At the time, New Avon was Avon’s North American operating entity, conducting business in the U.S., Canada, and Puerto Rico, with 2018 revenue of approximately 700 billion won. At the time of the acquisition, LG H&H outlined a plan to secure not only the Avon brand itself but also IT, procurement, logistics, and sales infrastructure along with specialized personnel in North America, and to use this as a springboard for LG H&H’s brands to enter the U.S. market.
One analyst noted, “Since the nominal sale price is merely about 5% of the 2019 acquisition cost, this transaction clearly confirms the impairment of the value of the previously acquired assets. However, the more significant aspect of this transaction is that LG H&H no longer views Avon as a core asset for its growth in North America.”
The analyst continued, “The North American business is currently shifting rapidly toward LG H&H’s own brands, such as Dr. Groot, CNP, Belif, and The Face Shop. Dr. Groot has led this growth with triple-digit growth, and thanks to improvements in the premium product mix, the entire North American business has turned a profit even excluding the effect of tariff refunds. He emphasized, “The company’s recent North American strategy is also focused on expanding into major distribution channels—such as Costco, Sephora, Ulta, Amazon, and TikTok—centered around Dr. Groot, CNP, Belif, and The Face Shop.”
He added, “While in the past we secured local distribution networks and sales scale through M&A (mergers and acquisitions), our own brands are now growing directly through major online and offline channels and have begun to generate profits. Although a decline in sales following the sale of Avon is inevitable, this move is significant for the qualitative improvement of our North American business, as it allows us to eliminate unprofitable operations and concentrate resources on our own brands, which offer high growth potential and profitability.”