Meritz Securities raised its target price for LG Electronics stocks to 260,000 won from 120,000 won on July 7, more than doubling the previous target, while maintaining a 'Buy' rating ahead of the company's second-quarter earnings announcement. Analyst Yang Seung-su attributed the upward revision to the materialization of AI data center cooling systems and robotics businesses, stating that corporate value re-rating has begun. The previous trading day's closing price stood at 185,700 won. The valuation upgrade reflects LG Electronics' progress in securing quality testing completion with North American hyperscaler clients for cooling systems and advancing robotics partnerships including Physical AI collaboration with NVIDIA.
Meritz Securities Projects Q2 Operating Profit 42.4% Above Consensus
Yang Seung-su projected LG Electronics' second-quarter consolidated revenue at 22.8 trillion won and operating profit at 1.4734 trillion won. The operating profit forecast represents a 130.4% increase year-over-year and exceeds market consensus of 1.0346 trillion won by 42.4%. While the market views US tariff refund effects as the core driver of the earnings surprise, Meritz Securities assessed that core business competitiveness remains solid. Yang stated, "The core of the surprise is the tariff refund effect, but considering HS division's price increases and subscription appliance growth, along with VS division's high-margin infotainment revenue expansion, core business profitability is judged to be maintained robustly." The analyst added that LG Innotek's strong performance will further expand consolidated profit improvement.
LG Electronics Nears Quality Testing Completion for AI Data Center Cooling Systems
LG Electronics has entered the final stage of completing quality testing for cooling systems targeting North American hyperscaler clients, according to Meritz Securities. If final orders are secured, revenue contribution is expected to begin within 6 to 9 months. The company is also conducting quality tests for liquid cooling (CDU) products with AI GPU clients. Meritz Securities stated that if orders materialize in earnest, this will serve as an additional factor for corporate value increase. The securities firm noted attention to the possibility of expanding business into a solution company covering overall AI data center infrastructure in collaboration with affiliates over the mid-to-long term. Yang explained, "As power density in AI data centers increases, LG Electronics is completing quality testing stages with hyperscaler clients."
Robotics Business Expands Through NVIDIA Physical AI Collaboration
Meritz Securities highlighted robotics as a growth driver, noting business expansion centered on actuators and home robots. LG Electronics is building an ecosystem with major domestic robot companies while pursuing Physical AI collaboration with NVIDIA to secure data and advance algorithms in robot operating environments. Yang assessed, "This can lead beyond simple hardware supply to strengthening robot platform capabilities, and is expected to act as a factor increasing the company's business expansion possibilities across household and industrial robot markets over the mid-to-long term."
Analyst Cites Concrete Business Developments Driving Valuation Re-Rating
Meritz Securities emphasized that the current stock price increase is driven by 'substance' rather than expectations as in the past. Yang stated, "In the past, LG Electronics' stock re-rating was driven by core business profitability recovery and Apple Car momentum. Currently, with new businesses such as AI data center cooling systems and robotics becoming concrete, more substantial re-rating factors are being formed compared to past Apple Car expectations." The analyst noted, "LG Electronics has been traded at a discount relative to KOSPI average price-to-book ratio (PBR) due to low core business growth, limited new business visibility, and low return on equity (ROE). With profitability improvement centered on HS and VS divisions, plus materialization of AI data center cooling systems and robotics businesses, existing discount factors are judged to be gradually resolving."
FAQ
What target price did Meritz Securities set for LG Electronics stocks on July 7?
Meritz Securities raised its target price for LG Electronics to 260,000 won from 120,000 won on July 7, more than doubling the previous target, while maintaining a 'Buy' rating. The previous trading day's closing price was 185,700 won.
What is the projected second-quarter operating profit for LG Electronics according to Meritz Securities?
Analyst Yang Seung-su projected LG Electronics' second-quarter operating profit at 1.4734 trillion won, representing a 130.4% increase year-over-year and exceeding market consensus of 1.0346 trillion won by 42.4%. Consolidated revenue was projected at 22.8 trillion won.
What new business developments are driving LG Electronics' valuation re-rating?
Meritz Securities cited the materialization of AI data center cooling systems and robotics businesses as key drivers. LG Electronics has entered final quality testing stages with North American hyperscaler clients for cooling systems, with revenue contribution expected within 6 to 9 months if orders are secured. The company is also expanding robotics business through Physical AI collaboration with NVIDIA and ecosystem building with domestic robot companies.
