LG Electronics’ foreign ownership tops 30% on car parts business outlook

[Photo by Park Hyung-ki]

Shares of LG Electronics Inc. has been rising on growing expectations in car electronics business, ㅣlifting foreign ownership to over 30 percent for the first time in a year and six months.

Foreign investors have been net buyers of the Korean IT giant, purchasing about 670 billion won ($518.5 million) worth of shares this year, making it the fifth most purchased stock among all listed companies in the country.

The foreign ownership of LG Electronics has steadily increased since the beginning of the year, starting at 26.16 percent. The stock price, which had been hovering around the mid-80,000 won range earlier this year, reached the 100,000 won mark on Jan. 30 and even set a 52-week high of 128,900 won on June 5.

LG Electronics demonstrated its strength by announcing an operating profit of 1.5 trillion won in the first quarter of this year, defying the global economic downturn and delivering an earnings surprise. It even surpassed Samsung Electronics’ operating profit of 640.2 billion won for the first time since the adoption of the International Financial Reporting Standards (IFRS) in 2009.

Operating profit of LG Electronics from its TV and home appliances business alone amounted to 1.2 trillion won, more than six times the 190 billion won of Samsung Electronics.

The anticipation for LG Electronics’ car electronics business, fueled by the electric vehicle battery boom, has also contributed to the rise in its stock price. On May 30, Hana Financial Investment Co. released a report that if the value of LG Electronics’ VS Business Division, responsible for car components, is taken into account, the target price could be raised from the previous 168,000 won to 195,000 won. On that day alone, the stock price jumped by 10.83 percent.

“LG Electronics’ current price-to-book ratio (PBR) of 0.97 times indicates that the value of its VS Business Division is not fully reflected. This is an opportune time for revaluation as the momentum of electric vehicle-related business gains prominence,” said Kim Rok-ho, an analyst at Hana Financial Investment.

He also forecasted that the performance contribution from LG Magna e-Powertrain, which is engaged in the battery-related business, would intensify in 2025, and at that time, the value of VS Business Division would be about 9.9 trillion won, double the current target price valuation of 4.9 trillion won.