April 26, 2024

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[THE INVESTOR] LG Household and Health Care’s third-quarter earnings were satisfactory but high dependence on Chinese private shuttle traders casts a gloom over its 2019 outlook, said DB Financial Investment on Oct. 24 lowering the target price to 1.58 million won (US$1,393) from 1.66 million won.

Its revenue in the period has gained 10.6 percent on-year to 1.74 trillion won and operating profit by 9.8 percent to 277.5 billion won. Despite 7.6 percent decline in sales of household goods, that of cosmetics hiked 24 percent on the back of strong demand in China. Relatively little concerns over earnings and increasing margin from higher-end lineups are positive but the unpredictability of Chinese traders is a liability. Sluggish domestic channels except duty-free stores also is a problem across the industries, said analyst Park Hyeon-jin, lowering the 2019 operating profit estimate 3.6 percent lower to 1.2 trillion won. 

Outlook for mid- to long-term earnings growth has been adjusted but its short-term momentum remains strong. Its stock price decline also could be attractive when the stock market stabilizes, she added maintaining a “top pick” recommendation. 

By Hwang You-mee (glamazon@heraldcorp.com)