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Strong Appliances, OLED Gains and B2B Shift Support Credit Profile
Fitch Ratings has affirmed LG Electronics Inc. (LGE) Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) at ‘BBB’, maintaining a stable outlook, citing confidence in the company’s ability to withstand near-term operating and macroeconomic pressures.
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According to the global ratings agency, LGE’s credit profile remains resilient, supported by improved performance at its display subsidiary, LG Display Co., Ltd. (LGD), robust home appliance operations, and a growing strategic pivot toward more stable business-to-business (B2B) segments.
Improving Outlook Despite Geopolitical and Cost Pressures
Fitch noted that geopolitical uncertainty—including the ongoing conflict in the Middle East—alongside rising component costs could weigh on near-term performance. However, the agency expects LGE’s operating margins to improve modestly over the medium term, with EBITDA leverage stabilising around 2.0x, consistent with a ‘BBB’ rating profile.
LG Display’s OLED Strategy Strengthens Group Performance
A key driver of LGE’s improving fundamentals is the turnaround at LG Display. Fitch expects profitability at LGD to strengthen further after the subsidiary returned to positive earnings in 2025 for the first time in four years.
This recovery is being driven by a sharper focus on organic light-emitting diode (OLED) panels, particularly for televisions and smartphones. LGD increased its OLED product mix to 61% in 2025, up from 55% in 2024, and plans to lift large-size OLED display shipments by another 10% in 2026, exceeding 7 million units, while expanding its customer base among major mobile device manufacturers.
Home Appliances and Premium Strategy Anchor Stability
Fitch expects LGE to retain a strong position in the high-end home appliance market, underpinned by brand strength, product diversification, and technological competitiveness. To offset rising input costs, the company is pursuing a dual strategy—deepening its premium product focus while expanding into mass-market offerings, particularly in emerging economies.
LGE’s growing subscription-based business is also becoming a meaningful earnings contributor, with revenue surpassing KRW2 trillion in 2025. Fitch projects this segment will remain a key profit driver, delivering an EBIT margin above 5% over the medium term.
B2B Expansion and Eco-Solutions Offer Growth Levers
While domestic growth in LGE’s eco-solution division is expected to slow, Fitch highlighted expanding B2B demand—especially in heating, ventilation and air conditioning (HVAC)—as a key growth opportunity. Global demand for energy-efficient cooling systems, alongside new businesses such as data centre chillers, should support the division’s outlook.
Fitch forecasts the eco-solution unit will maintain an operating margin of around 7% over the medium term, despite pressure from higher raw material and logistics costs.
TV and Vehicle Components: Gradual Recovery Expected
Losses in LGE’s TV business are expected to narrow in 2026 following an operating loss in 2025 caused by higher costs, intense competition, and one-off early-retirement programme expenses. Fitch said improving cost structures and demand linked to major sporting events—such as the FIFA World Cup—should support recovery.
In addition, higher-margin webOS services, including advertising and content sales, are expected to become a long-term profitability driver for the TV segment.
In the vehicle component solutions division, growth is likely to slow in the near term due to weaker electric vehicle demand—particularly in the US—and softer consumer confidence. However, margins improved to 5% in 2025 and are expected to remain in the mid-single digits over the medium term.
Balance Sheet Strength and Liquidity Remain Solid
Fitch expects LGE to maintain disciplined balance sheet management and adequate liquidity buffers. EBITDA leverage is projected to improve to 2.1x in 2026, from 2.4x in 2025, supported by stronger LGD performance and the absence of one-off restructuring costs.
LGE’s cash position was further strengthened by the fourth-quarter 2025 IPO of its Indian operations, which generated KRW1.8 trillion. Capital expenditure is expected to remain around KRW3.9 trillion in 2026, while capex at LG Display is projected to rise in the medium term following several years of restrained investment.
Ratings Withdrawal Not Credit-Driven
Fitch clarified that it has decided to withdraw LGE’s ratings for commercial reasons, rather than due to any deterioration in the company’s credit quality.
