By Park Si-soo
LG Household and Healthcare, the nation’s second biggest cosmetics maker, is drawing keen attention from investors as to whether the stock could breach the 1 million won mark on robust sales in China and other Asian countries.
Despite a recent correction following steep gains, most analysts predict that the stock will rise over the threshold in the foreseeable future, catching up with the long-time market leader AmorePacific whose stock reached 4 million won before a stock split earlier this month.
LG’s shares closed at 857,000 won on Friday, down 27,000 won or 305 percent. The Korean stock market will be closed on Monday to celebrate Buddha’s Birthday.
Dongbu Securities and several other brokerage houses recently revised their target price for LG to 1 million won, citing its record high first-quarter sales, operating profit and net profit.
It recorded 178. 5 billion won in operating profit in the three months to March, up 39.1 percent from a year earlier Its sales rose 15. 4 percent to 13 trillion won in sales, with net profit jumping 37.6 percent to 124. 4 billion won.
Its second-quarter results are also expected to be better than the previous year
“LG will show strong growth for a while,” said analyst Park Hyun-jin at Dongbu Securities. “Its major driving force comes from brisk sales in China and at domestic duty free stores.”
Analyst Ham Seung-hee of KDB Daewoo Securities said LG’s “earning surprise” will continue throughout this year
She said the growth will gain momentum with rising sales of newly-launched products such as “su:m” and “belif. ”
“LG is making greater efforts to bolster its product lineup, especially high-end product line. This will help bolster the company’s profitability,” Ham said.
Park Jong-dae of Hana Daetoo Securities forecasts that LG’s second-quarter operating profit would rise 30 percent year-on-year
Last week, LG won approval to build a large-scale cosmetics-manufacturing plant in Cheonan, 80 kilometers south of Seoul.
The company will invest 370 billion won to build aanced manufacturing facilities and research and development center, which will go operational in 2018.
LG recently stepped up its promotion of high-end products to deep-pocketed Chinese customers in a bid to maximize its performances. To that end, it has hosted various marketing events open exclusive to VIP customers at luxury department stores in Beijing, Shanghai and other major Chinese cities.
Other nations or regions it tries to increase sales include Hong Kong, Japan, Russia, Europe and the Middle East.
“We see high chances of growth in the countries where Korean pop music, TV dramas and films are popular,” an LG official said. “We are trying to appeal to customers in these countries with customized marketing strategies.”
SOURCE: The Korea Times