Brokerages raise LG Electronics price targets despite third-quarter profit miss

Korean brokerages raised their target prices for LG Electronics this week even though the company's third-quarter operating profit fell short of expectations. LG Electronics reported third-quarter revenue of 23.827 trillion won and operating profit of 781.8 billion won, up 8.9% and 13.5% from a year earlier. Yonhap said the figures missed market consensus by more than 20%, while Daol Investment & Securities, as cited by Maeil Business, put operating profit about 25% below a consensus of 1.0412 trillion won. [ 3 , 4 ]

Samsung Securities kept a buy rating and raised its target from 210,000 to 250,000 won. Analyst Lee Jong-wook called the quarter an earnings shock 26% below the firm's estimate but said it need not be read as damage to the company's fundamentals. Daol raised its target from 240,000 to 270,000 won. Yonhap reported that DB Securities and KB Securities raised their targets from 245,000 won to 265,000 and 260,000 won, while Korea Investment & Securities and Kiwoom Securities kept 265,000 and 230,000 won. [ 3 , 4 ]

The brokerages differed on the causes of the miss. Samsung Securities pointed to raw material and logistics costs in home appliances, deferred revenue recognition in the vehicle components unit, and exchange rate effects on subsidiaries including LG Innotek. Daol attributed it to new business investment costs and weak consolidated subsidiaries. Both said the media and entertainment unit stayed profitable. [ 3 , 4 ]

Samsung Securities cut its operating profit estimate for this year by 6% to 4.193 trillion won and raised next year's by 8.1% to 4.569 trillion won. Daol lowered this year's estimate by 12.3% to 4.3334 trillion won and raised next year's by 1.5% to 5.7586 trillion won. [ 3 , 4 ]

AI data center cooling was the main reason given for the upgrades. Samsung Securities said related sales could grow from about 1 trillion won this year to 5 trillion won within two years, with orders expanding from chillers to coolant distribution units. Daol expects an existing backlog of about 600 billion won to turn into revenue from the first half of next year. Meritz Securities, which raised its target from 220,000 to 250,000 won, expects about 3 trillion won of backlog by year-end. [ 2 , 3 , 4 ]

On robotics, Meritz analyst Yang Seung-soo said about 200 CLOiD robots are being trained at LG's Yangjae data factory, with plans to deploy them to US production sites from next year. Daol said LG is in talks with potential customers on mass production of actuators and could book revenue from early next year if it wins orders. [ 2 , 4 ]