[Alpha Biz= Paul Lee] Stock price outlooks are diverging among Korean blue-chip companies amid expectations surrounding inclusion in and exclusion from the MSCI indices, a key benchmark for global investors.

Hyundai Engineering & Construction (Hyundai E&C) is widely expected to be added to the MSCI index in the upcoming February rebalancing, fueling strong investor optimism. In contrast, LG Household & Health Care (LG H&H) faces growing concerns over potential exclusion, prompting more cautious assessments.

According to the Korea Exchange, Hyundai E&C closed at KRW 109,200 on the 23rd, up 5.0% from the previous session. The stock surged as high as KRW 122,000 during intraday trading, marking a new 52-week high.

Market sentiment has been buoyed by expectations that Hyundai E&C will be included in the MSCI February index review, scheduled to be announced on February 11.
Ko Kyung-beom, analyst at Yuanta Securities, noted that MSCI index changes are determined based on ten trading days following January 16. “With the exception of January 22, Hyundai E&C has met the inclusion criteria on all review dates,” he said, assigning a “High” probability to its inclusion.

Beyond index-related momentum, improving profitability and growing visibility in the nuclear power sector are also supporting the stock.
Lee Sang-ho, analyst at Kyobo Securities, said that “greater clarity in the nuclear power project pipeline is expected to further strengthen share price momentum,” maintaining a BUY rating and raising the target price to KRW 130,000.

Similarly, Kim Jin-bum of SangSangIn Securities highlighted renewed demand for nuclear power driven by concerns over electricity supply shortages as a key catalyst, sharply raising his target price to KRW 125,000.

In contrast, LG Household & Health Care is increasingly viewed as a likely candidate for exclusion from the MSCI index, a factor that could weigh on its share price.

Ko Kyung-beom stated that LG H&H has a high probability of being removed from the index, while Coway faces a moderate risk assuming Samsung Biologics’ affiliate fails to be included, and Doosan Bobcat’s exclusion risk remains limited.

Analysts also point to structural challenges in LG H&H’s core cosmetics business.
Lee Ji-won of Heungkuk Securities described the outlook as “still an uphill battle,” citing declining top-line growth in the cosmetics segment as the primary cause of weak fourth-quarter earnings. She lowered the target price to KRW 240,000.

Given the stock’s closing price of KRW 274,000 on the 23rd, this implies potential downside of approximately KRW 34,000.

Cho So-jung of Kiwoom Securities echoed similar concerns, noting that ongoing adjustments in domestic distribution channels, persistent weakness in China, and rising marketing investments aimed at expanding the North American market are likely to pressure profitability. She set a target price of KRW 250,000, indicating further downside risk.

Cho added that LG H&H’s fourth-quarter revenue is expected to fall short of market expectations, as declining profits from China-focused channels and increased marketing spending in North America continue to weigh on earnings.

 

 

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