LG Corp.'s Plan to Raise Stakes in LG Electronics, LG Chem Lift Their Shares

By Kwanwoo Jun

LG Corp.'s plan to raise its controlling stakes in LG Electronics and LG Chem sent their shares higher on Friday.

Shares of LG Electronics and LG Chem climbed as much as 7.4% and 2.8%, respectively, outperforming the stock benchmark Kospi's 0.7% gain.

LG Corp., the holding company of South Korea's LG Group conglomerate, said late Thursday it will spend 500 billion won, the equivalent of $374.7 million, to buy more shares of the LG home-appliance and chemical affiliates.

LG Corp. has 200 billion won set aside to buy LG Electronics shares from the market and 300 billion won for LG Chem shares for five months until March 31 2025. That is expected to lift its stakes in those subsidiaries to 31.59% and 31.29%, respectively.

The plan should help boost shares of LG Electronics and LG Chem, which look undervalued despite their strong earnings outlooks, Douglas Research Advisory analyst Douglas Kim said in a note published by Smartkarma.

LG Electronics' shares have fallen 45% from their peak in January 2021, while LG Chem's have declined 68% since their peak in February 2021, the research note said.

Kim expects LG Electronics' net profit to double in 2024 and rise 26% in 2025. For LG Chem, net profit is forecast to drop 33% this year but rebound strongly to more than double next year, he said.

Markets also view the holding company's move as a positive because it appears that LG Corp. is buying additional shares of the affiliates at material discounts to their intrinsic values, Kim added.

Write to Kwanwoo Jun at kwanwoo.jun@wsj.com