LG H&H leads upgrade list as analysts see North America replacing China

LG H&H has emerged as the stock with the most analyst upgrades this month even as the Kospi has tumbled sharply. Amid broadly weakened investor sentiment, analysts have cited a recovery in duty-free sales and the growth potential of the company's North America business as grounds for a revaluation. The assessment is that a concrete earnings-recovery path is taking shape as the center of gravity in LG H&H's overseas operations shifts from China to North America.

According to FnGuide, LG H&H has received more buy-rating upgrades than any other stock so far this month. Shinyoung Securities, Meritz Securities and Kiwoom Securities all issued buy recommendations.

The first change drawing analysts' attention is the recovery in duty-free sales, compounded by the North American growth of the haircare brand Dr. Groot. Dr. Groot's sales on Amazon began rising rapidly from early 2025, and the brand has since expanded its offline retail footprint by entering Costco and then Sephora.

"Duty-free sales are gradually recovering, and Dr. Groot's growth momentum in North America is continuing," said Lee Kyo-seok, an analyst at Shinyoung Securities. "The North American haircare market is a category where no K-beauty brand has yet emerged as the leader, making it an area where a large brand company with extensive high-volume production facilities — built for its domestic lifestyle products business — can truly demonstrate its strengths."

The bigger shift is the pivot in overseas operations from China to North America. Some analysts now forecast that North America sales could overtake China sales for the first time this year. On top of Dr. Groot's Amazon growth, expanded placement at Costco and Sephora is extending the brand's online-proven competitiveness into offline retail. Beyond Dr. Groot's strong growth, the expansion of offline distribution for Belif, CNP and The Face Shop has also served as a growth driver.

"North America's own-brand sales are growing, shifting the center of the overseas business from China to North America," said Son Ye-bin, an analyst at Kiwoom Securities. "The brand growth confirmed online could carry over into broader offline channel expansion."

"The company is reducing its dependence on China and diversifying its regional portfolio with North America at the center," said Park Shin-ae, an analyst at Meritz Securities. "By focusing on cultivating hero products for each brand rather than frequent new-product launches, and by building on the competitiveness of its key brands and expanding distribution channels, the company will lay the groundwork for medium- to long-term growth." Meritz Securities set a target price of 370,000 won ($274), 37.5 percent above the closing price on Sept. 30.

Analysts also cautioned that for the earnings rebound to translate into a genuine growth phase, the company will need to demonstrate sustained sales growth and margin improvement beyond the profit gains attributable to a low base. In the second half of 2026, one-off losses from the disposal of past overseas acquisition assets — including losses on the sale of Avon — could weigh on net profit.

"This year's operating profit growth reflects the low-base effect and the cosmetics business turning profitable," Park said. "On top of the profit growth rate, the key question going forward is whether North America's momentum translates into sustained sales expansion and margin improvement."