Fitch Affirms, Withdraws LG Electronics Ratings

Fitch Affirms, Withdraws LG Electronics Ratings

Fitch Ratings has affirmed LG Electronics Inc’s (LGE) Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) at ‘BBB’ with a stable outlook.

The global ratings agency said the affirmation and outlook reflect its view that LGE’s credit profile will withstand near-term challenges.

The rating noted highlighted that this should be supported by enhanced performance at its subsidiary, LG Display Co., Ltd. (LGD), as well as solid home appliance operations.

Fitch said the ratings are further underpinned by LGE’s strong global presence and market position, adding that a shift towards business-to-business (B2B)-driven segments should enhance business stability.

“While geopolitical uncertainties, including the ongoing war in the Middle East, and rising component costs could pressure short-term operating performance, we forecast LGE’s operating margin to improve slightly over the medium term, with a steady EBITDA leverage ratio of around 2.0x aligning with a ‘BBB’ rating level”.

Fitch said it has decided to withdraw LGE’s ratings for commercial reasons. “We expect profitability at LGD to further improve, after turning positive for the first time in four years in 2025”.

Ratings analysts said the improvement should be driven by a greater focus on organic light-emitting diode (OLED) panels, particularly for televisions and mobile phones.

LGD has steadily increased its OLED mix to 61% in 2025, from 55% in 2024. LGD plans to boost large-size OLED display shipments by another 10% to over 7 million units in 2026 and expand market share among major mobile phone manufacturers.

LGE’s operating performance faces near-term pressure from rising component costs, including memory chips, and from potential weakening in global consumer demand, which could be exacerbated by the war in the Middle East and by tariffs.

“We expect LGE to maintain a solid position in the high-end home appliance segment, driven by its competitive edge, diversified product portfolio and robust brand”.

The electronics company aims to offset rising costs with a two-tier strategy: focusing on premium products while expanding into mass markets, especially in emerging economies.

LGE is also growing its subscription business, with revenue exceeding KRW2 trillion in 2025. Analysts project the division will remain the main profit driver, with an EBIT margin of above 5% over the medium term.

Fitch expects domestic growth to slow in the eco-solution division. However, a rising share of B2B sales, particularly in heating, ventilation and air conditioning, offers growth opportunities given strong global demand for energy-efficient cooling systems.

New business, including data centre chillers, should also contribute to growth. Fitch analysts project the division will maintain an operating margin of about 7% over the medium term, despite possible pressure from rising raw material and logistics costs.

Fitch expects losses in the TV business to narrow in 2026, following an operating loss in 2025 driven by higher costs, strong competition, and one-off early-retirement programme costs.

While the operating environment is likely to remain challenging, the improvement should be supported by a better cost structure and demand from major sporting events, like the FIFA World Cup.

“We believe TV margins could also benefit from a rising share of high-profit webOS services, which bring advertising and contents sales. Such services are likely to become a long-term profit driver”.

Ratings analysts expect growth in the vehicle component solutions division to slow in the near term on weaker demand for electric vehicles, especially in the US, and reduced consumer confidence.

However, the division’s operating margin improved to 5% in 2025 on a stronger product mix and should remain in the mid-single digits in the medium term. Fitch analysts expect LGE to maintain control of the balance sheet and to maintain a sufficient liquidity buffer.

“We forecast proportionately consolidated EBITDA leverage to improve to 2.1x in 2026, from 2.4x in 2025, on stronger operations at LGD and a low-base effect from one-off early retirement programme costs in 2025”.

Ratings analysts said LGE’s cash position was also boosted by the 4Q25 IPO of its Indian operations, which generated KRW1.8 trillion. Fitch said capex should remain around KRW3.9 trillion in 2026 at LGE, but analysts expect capex at LGD to rise in the medium term after minimal spending in recent years. GCR Assigns Leadway Holdings AA/A1+ Ratings, Outlook Stable