[종목 현미경] It doubles in a month… Gyeophojae LG Electronics’ goal is’growing up’

LG Electronics’ share price has doubled in recent months. This is the result of successive beneficial materials such as the establishment of a parts joint venture with Magna and the expectation of the withdrawal of smartphones in the red business.

As the stock price continues to run, the burden is gradually increasing, but there are many opinions that it is possible to re-evaluate the value (valuation) if the withdrawal of the smartphone business, which has been a factor of stock price discounts (discount), becomes a reality. The target price is also rising sharply.

According to the Korea Exchange on the 23rd, the stock price of LG Electronics was 17,500 won the previous day, a 92.5% increase from 92,200 won on December 22, a month ago. During this period, the market cap (excluding preferred stocks) jumped 9 places from 21st to 12th.

The share price, which began to rebound in anticipation of earnings improvement, began to surge on the news of establishing a joint venture in the field of electric vehicle powertrain (power transmission system) with Magna International, the world’s third largest auto parts maker. On the 23rd of last month, when the news of the joint venture was announced, it recorded an upper limit, which is rare for large stocks in about 12 years since October 30, 2008.

In addition, as the possibility of withdrawal of smartphones (MC), which is a deficit business, increased, the stock price surged again. It surged 33% for only three trading days on the 19th and 21st. However, it fell 4% the previous day.

Although a specific scenario has not yet been determined, the analysis is that the withdrawal of the MC division, which has been a factor in valuation discounts due to a long-term deficit, will serve as a positive for corporate value.

Kim Ji-san, head of the research center of Kiwoom Securities, said, “Based on the turnaround of automobile parts and the elimination of smartphone risks, we have an ideal business portfolio, and corporate value re-evaluation will be actively carried out.” We have secured a foundation that we can do.”

Expectations for earnings are also rising. Last year, LG Electronics’ preliminary operating profit was 3,205.7 billion won, a 31% increase from the previous year. This year’s stock price’s operating profit consensus (average forecast) is 3,7104 billion won, an increase of 15.7% compared to last year. Considering that the MC division recorded a deficit of about 500 billion won, it is likely to jump to 4 trillion won.

As a result, the target price of securities companies is also on the rise. According to F&Guide, the average target price of LG Electronics as of the 21st was 16,9857 won, which is 51% higher than that of October 30 last year (11,2211 won), which was about three months ago.

In particular, after raising the possibility of the withdrawal of the MC division, the target price average of the seven securities companies that published LG Electronics’ corporate analysis reports exceeded 200,000 won at 21,7142 won.

Samsung Securities researcher Lee Jong-wook said, “The stock price has skyrocketed, but the company is changing more rapidly.”

Although there may be fatigue due to a short-term surge, some analyzes say that the valuation is not burdensome yet.

Cho Cheol-hee, a researcher at Korea Investment & Securities, who presented a target price of KRW 220,000, said, “The target price corresponds to a net asset ratio (PBR) of 2.1x as of 2021, which is similar to the average PBR of the home appliance and TV sectors (2.2x).” Compared to the valuation discount factor will quickly disappear.”

Scenarios for the withdrawal of the MC division, which are still a factor of uncertainty, include the sale of divisions, reorganization of divisions, and concentration of manufacturer development and production (ODM). The best scenario is the sale of the business unit.

LG Electronics is also proactively considering a plan to split and sell the production division, leaving the R&D division behind. While it is known that Vietnam’s Vingroup is showing interest in the acquisition, IT companies such as Facebook, Google, and Microsoft and Volkswagen are also mentioned as potential candidates.

“Since the large-scale deficit factor is resolved and cash inflows for goodwill and patent values ​​occur, the best scenario in terms of corporate value is the sale of the business unit.” (IoT) It will support future business competitiveness such as home appliances, robots, and autonomous vehicles.”

It was written with the content provided through News1.