[Alpha Biz= Paul Lee] Daishin Securities projected on the 30th that LG Household & Health Care (LG H&H) will face inevitable profitability pressures due to restructuring in its beauty business, which is leading to a contraction in the duty-free channel, coupled with sluggish demand in China. The firm maintained its investment rating at Marketperform and kept its target price at KRW 290,000.



Analyst Han-sol Jung of Daishin Securities noted,



“While LG H&H continues to pursue growth drivers outside China in line with shifting consumer trends, contributions remain limited. Household goods and beverage segments are helping to offset downside risks, but weakness in beauty is heightening short-term earnings uncertainty.”



Jung added that the restructuring could improve the business model and brand competitiveness of the beauty segment in the mid to long term. However, until China operations normalize and tangible results emerge in overseas markets such as North America and Japan, a cautious stance is warranted.



For Q3 2024, Daishin Securities forecasts consolidated revenue of KRW 1.63 trillion and operating profit of KRW 48.1 billion. Within this, the cosmetics division is expected to post revenue of KRW 575.3 billion and an operating loss of KRW 30.7 billion, weighed down by continued luxury cosmetics demand weakness in China and the impact of domestic channel restructuring.



Jung further explained,

“Duty-free revenue is projected to decline 45% year-on-year as the company adjusts supply to stabilize local distribution and normalize pricing in China. Meanwhile, delays in consumer recovery and intensified online competition will likely sustain losses in the Chinese business.”



Despite efforts to strengthen financial soundness in local operations and expand online and H&B (health & beauty) channels domestically, short-term earnings deterioration remains unavoidable. In overseas markets, strategic brands such as Belif and CNP continue to show growth in North America and Japan, but their contribution to overall earnings remains limited due to scale.

 

 

 

 

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