By Kim Young-gyo
HONG KONG, March 6 (Yonhap) -- South Korea's LG Electronics Inc. will likely see its profitability improve this year as its handset and TV businesses are likely to recover, a report showed Tuesday.
Nomura Securities International Inc. said it has upgraded its investment recommendation on LG Electronics to "buy" from "neutral," adding that positive changes are expected in both its handset and TV divisions.
The Japanese investment bank downgraded its rating on LG Electronics to neutral in November 2011, citing its new share issues aimed at improving liquidity, which diluted LG Electronics' stock value by 12 percent.
"The newly issued shares were listed in early January this year, and LG Electronics has secured a more positive business direction in both its TV and handset businesses since the capital increase," said James Kim, a Nomura analyst.
"We now expect operating profit in the first quarter of 2012 to be 204 billion won, compared to our previous forecast of 110 billion won, mainly owing to a better forecast for handset margin at 0.7 percent and TV margin at 1.9 percent."
In the TV industry, the mainstream technology for three-dimensional TVs is expected to be film-type patterned retarder, for which LG Electronics' subsidiary LG Display Co. appears currently to be the only supplier globally, Nomura explained.
It also said LG Electronics has improved the overall quality of its smartphones by assigning more research and development (R&D) staff to the business, with an estimated 60-70 percent of LG Electronics' 8,000 R&D employees focusing on smartphone development at the end of 2011, compared to 20 percent of 6,800 R&D employees having focused on smartphone development as of the beginning of 2011.