-Stock prices have raised the target price for LG Electronics one after another. It is expected that the possibility of withdrawal of the MC (smartphone) business, which has recorded a loss for 23 consecutive quarters, will lead to improvement in corporate profits.
According to the securities industry on the 22nd, Korea Investment & Securities, Kiwoom Securities, and Hi Investment & Securities raised their target price for LG Electronics again in 10 days. Hi Investment & Securities offered a target price of 230,000 won, the highest among securities companies, and Korea Investment & Securities and Kiwoom Securities each offered 220,000 won.
On the 11th, Hi Investment & Securities raised the target price of LG Electronics to 185,000 won, and Korea Investment & Securities and Kiwoom Securities each raised 180,000 won.
Samsung Securities also raised its target price for LG Electronics to 170,000 won on the 4th, and then raised it to 220,000 won in about two weeks. Hyundai Motor Securities increased from 105,000 won to 190,000 won in about four months. The reason why major securities companies raised LG Electronics target prices at the same time reflects the expectation of the withdrawal of the smartphone business, which has been in the red for many years. On the previous day, LG Electronics’ stock price surged 19,000 won (12.84%) to 167,000 won in anticipation of the withdrawal of the smartphone business, breaking the record high in about 13 years. The previous highest price was 164,000 won on May 15, 2008. According to Kiwoom Securities, LG Electronics recorded an operating loss of 4.7 trillion won in the smartphone business for six years since 2015. It is estimated that the size of the loss considering the common cost is more than this.
Kim Ji-san, a researcher at Kiwoom Securities, said, “Since the second half of last year, the sales performance of velvet and wing, which are strategic models, have been poor, and as 5G momentum has also peaked, our position in the premium phone market has been reduced and additional cards are limited. “Rollable phones seem enough to show off their advanced technology, but it is difficult to reflect meaningful sales and performance.”
In the industry, it is expected that it will lead to the withdrawal of the actual business after LG Electronics has revealed that it is open to all possibilities regarding the direction of operating the smartphone business. In this case, the discount factor for the stock price will disappear, and the corporate value is expected to be revalidated.
Cho Cheol-hee, a researcher at Korea Investment & Securities, said, “Last year’s MC division’s estimated sales amounted to 5.2 trillion won, which is 8.3% of the total, but the size of the operating deficit is estimated at 838 billion won, which has a significant impact on company-wide operating profit (3.2 trillion won). “We are raising the target price by changing the operating value of the MC headquarters, which had been in a large deficit, from -5 trillion won to zero,” he said.
Eui-young Ko, a researcher at Hi Investment & Securities, said, “The discount factors due to the MC headquarters can be summarized as the damage of sustainable ROE (return on equity), the decrease in the reliability of estimates of cash flow due to frequent occurrence of one-off costs, and inefficient allocation of company-wide resources. , All of these are factors that increase the discount rate when calculating corporate value. “If you withdraw from the smartphone business, you can see it from the perspective of dissolving the discount.”
However, some say that it remains to be seen what decisions LG Electronics will make regarding its smartphone business.
Park Hyung-woo and Go Young-min, researchers at Shinhan Investment Corp., said, “The direction of reducing the smartphone-related deficit, which caused a deficit of 700 billion to 1 trillion won each year, became clear, and if the MC division was sold after improving the performance of the electronics division, a profit of about 1.3 trillion won this year. “There is an improvement effect,” he said, “but the final decision remains to be seen.”
(Seoul = News 1)
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