LG Electronics Inc. (LGELEC)

LGE’s current credit quality remains comfortably within global investment grade, but it is not protected by the thick margins typical of higher-tier investment grade. The direction was weak if viewed only through full-year 2025 earnings deterioration, but 1Q 2026 recovery, VS profitability, and reduced LG Display-related risk suggest a phase of stable to mildly improving credit momentum. The probability of rapid credit deterioration is not high at present, but the view could move downward relatively quickly if MS returns to losses, tariffs, raw materials and logistics costs, LG Display support risk, and medium-term refinancing costs overlap.

This assessment is supported by stable HS earnings, VS profitability, ES’s B2B growth potential, cash in the KRW 8tn range, domestic and international investment-grade ratings, and market access confirmed through the 2024 dollar-bond issuance. Even though LGE’s operating margin fell to 2.8% in 2025, it maintained operating cash flow of KRW 4.28tn and increased cash. In 1Q 2026, the operating margin recovered to 7.1%, and the operating margin for LGE excluding LG Innotek was also 7.5%. This indicates that the weakness of 2025 has not necessarily become permanent.

At the same time, the upper limit of the credit assessment is constrained by low full-year margins and business volatility. MS recorded a large loss in 2025, and competitive spending and demand cyclicality in the TV and media business remain heavy. HS is stable, but U.S. tariffs, raw materials, and logistics costs cannot necessarily be fully passed through. VS and ES are growth businesses but are affected by auto demand, EV slowdown, construction market conditions, regional demand, and investment burden. LG Innotek’s consolidated contribution is large but is not direct collateral for parent debt, while LG Display remains an equity-method and support-risk exposure.