Shares of LG H&H, the South Korean beauty-product company, tumbled Friday following disappointing third-quarter earnings and a bleak outlook for 2023. According to FactSet, the stock plunged as much as 18% to 322,000 Korean won ($237.89), marking its largest daily percentage decline since its listing in 2001. In contrast, the benchmark Kospi index was up 0.7%.
The sell-off was prompted by below-consensus results for the July-September quarter, with LG H&H reporting a 28% decrease in net profit compared to the same period last year, amounting to KRW91.30 billion. This fell short of the FactSet-compiled consensus forecast of KRW95.61 billion.
The decline in earnings was largely attributed to a sharp decrease in cosmetics sales at duty-free shops and in China. Consequently, LG H&H has revised its full-year target downwards.
The company now anticipates its operating profit for 2023 to reach KRW470 billion, a 36% decrease from its previous target. Citigroup analyst Paul Hwang noted that this revised guidance implies a 70% downside risk relative to the market consensus forecast for LG H&H’s fourth-quarter operating profit.
Hwang further stated that there is currently no immediate driver expected to spur a recovery in the share price, and he predicts an even larger earnings miss in the final quarter of the year.
In light of these developments, Citi has reduced its target price for LG H&H stock by 11% to KRW400,000, while maintaining a neutral rating.