98414 112913 2444

The author is an analyst of NH Investment & Securities. He can be reached at dongyang.kim@nhqv.com. — Ed. 

We expect LG Corp to strengthen its business portfolio through M&As and CVC, using W1.7tn in net cash holdings. DPS should continue to rise thanks to increased dividend income. The stock is currently trading at a 64% discount to NAV.

To strengthen business portfolio and enhance shareholder value via net cash and dividend income

We expect LG Corp to strengthen its growth portfolio, focusing on ESG, bio/digital healthcare, and deep tech, using corporate venture capital (CVC) and net cash of W1.7tn. Opportunities should also emerge from greater investment in the firm’s ESG management system. In line with the mid/long-term share repurchase plan (W500bn by 2024) announced at end-May, the firm has purchased 1.35mn shares worth W106bn (0.86% out of outstanding shares).

Despite a reduced number of subsidiaries due to LG-LX separation, dividend income in 2022 should rise by 9% to W566.7bn thanks to LG Chem and LG U+’s increased year-end dividend payment in 2021, and LG U+’s expanded interim dividend payment. Dividend income is also expected to be strong in 2023 on D&O’s disposal of a 60% stake in S&I Atxpert (W364.3bn) and a 60% stake in S&I E&C (W290bn).

We maintain a Buy rating and raise our TP from W135,000 to W150,000 to reflect changes in the share prices of listed subsidiaries. LG Corp’s shares are currently trading at a 64% discount to NAV.

2Q22 results: Outstanding revenue and profit growth at LG CNS

LG Corp’s 2Q22 results missed consensus, with sales of W1.73tn (+14% y-y) and OP of W500.5bn (-14% y-y).

Equity-method gains from LG Electronics missed expectations as LG Display’s operating loss expanded due to weak IT panel prices. Despite the sluggish petrochemical market, LG Chem’s earnings grew qualitatively thanks to an earnings surprise at the advanced materials business. LG CNS, an unlisted subsidiary, achieved its highest quarterly growth since 4Q10 (sales +35% y-y) on the back of strong demand for digital transformation such as cloud computing, leverage effects at its smart logistics business, and expanding IT investment at affiliates. Despite a hike in IT manpower costs, the firm’s OP continued to grow to W87.3bn (+55% y-y), with an OPM of 7.6% (+1.0%p y-y).




TrufflEat Olio Evo 300x207 1

Leave a Reply