Brokerages rush with downgrades on LG H&H after another disappointing quarter

South Korea’s beauty and home care major LG H&H invited a scurry of stock downgrades by brokerages as it kept up earnings disappointment streak due to struggles in Chinese operation.

The company on Thursday reported its operating profit for the July-September period fell 44.5 percent on year to 190.1 billion won ($134 million), which was nearly 17 percent lower than market consensus.

Revenue slid 7 percent to 1.87 trillion won, and net profit tumbled 46.8 percent to 127.4 billion won.

Korea Investment & Securities also cut the stock from ‘buy’ to ‘neutral’ without suggesting a target price. Hyundai Motor Securities downgraded LG H&H from ‘buy’ to ‘neutral’ and sharply lowered its target price from 900,000 won to 600,000 won. Other brokerages followed suit for their target price: Shinhan (870,000 → 770,000), Samsung (590,000 won → 500,000 won), Kiwoom (800,000 → 710,000 won), Kyobo (900,000 won → 700,000 won), eBest (880,000 won → 700,000 won), Meritz (950,000 won → 780,000 won), Cape (880,000 won → 650,000 won), Daol (720,000 won → 600,000 won), DB (900,000 won → 600,000 won).

Korean cosmetics are losing their position due to patriotic consumption trends in China and aggressive marketing by global competitors in the largest market for Korean brands, said Kim Myung-joo, an analyst at Korea Investment & Securities.

The sluggish performance of the local cosmetics industry has continued for the fifth quarter, said Park Eun-kyung, an analyst at Samsung Securities, adding that slow demand in China combined with China’s tightened regulations on Internet influencers is making it difficult to fathom how long the weak business performance will continue.

LG H&H shares were trading at 508,000 won, down 3.61 percent from the previous session at 1:25 pm on Friday.

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