Shinhan Securities has set a target price of 290,000 won for LG Electronics (066570), the second-highest among domestic brokerages. The reasoning is that while home appliances have largely driven the direction of LG Electronics' share price until now, robotics and heating, ventilation and air conditioning (HVAC) will bring about a re-rating of the company's valuation going forward.
Oh Kang-ho, a research fellow at Shinhan Securities, published a report on LG Electronics titled "Different From Here On" on the 2nd, raising the target price 61% to 290,000 won from 180,000 won. That implies 37.1% upside from the previous session's close of 211,500 won. Oh described LG Electronics as "the flagship information technology company most worth watching as it enters the artificial intelligence value chain."
The revision comes about two months after the previous one on July 31. Shinhan Securities set a target price of 110,000 won for LG Electronics last November and has raised it four times this year. Its 290,000 won target is the second-highest among brokerage estimates for the stock. The highest is Kyobo Securities' 350,000 won.
"The core axis determining the direction of the share price has shifted from earnings-driven home appliances and automotive components to valuation-driven robotics and HVAC," Oh said. "We see the fourth quarter of this year through the first quarter of next year, with order expectations and events such as the Consumer Electronics Show (CES) in the U.S., as the timing for valuation to come to the fore."
To calculate the target price, Shinhan Securities applied the average price-to-book ratio (PBR) from the 2020-2021 growth phase and a next-year book value per share (BPS) estimate that is 10% higher than its previous projection. The brokerage cited LG Electronics' full-scale entry into the HVAC AI market next year, the accelerating commercialization of its robotics business and confirmation of the earnings strength of existing divisions such as home appliances and auto parts.
Separately, LG Electronics recently said it would build a chiller manufacturing plant in the U.S. and expand domestic production lines to meet growing demand for cooling solutions for AI data centers.
The plant in Windsor, Virginia, with a total floor area of 32,000 square meters on a 170,000-square-meter site, is targeted to begin production in the first half of next year. LG Electronics plans to secure a local production base in Virginia, where big tech data centers are concentrated, to improve supply speed and stability for North American customers.
