[Click eStock] "LG Innotek Expected to Deliver Q4 Earnings Surprise"

[Asia Economy Reporter Oh Ju-yeon] Meritz Securities forecasted that LG Innotek's operating profit in the fourth quarter of this year will record an 'earnings surprise' exceeding market consensus.

On the 19th, Meritz Securities projected LG Innotek's fourth-quarter sales and operating profit to be 3.78 trillion KRW and 386.4 billion KRW respectively, surpassing consensus by 9% and 26%. The main reasons cited were increased production of camera modules for the new iPhone model and improved performance of automotive components. They explained that if the KRW-USD exchange rate remains in the low 1100 won range until the end of the year, achieving 386.4 billion KRW is not unrealistic.

Researcher Joo Min-woo of Meritz Securities stated, "Due to Apple's cost-cutting strategy, supply has been in a single-camera form since 2021, making price declines inevitable, but an increase in quantity is expected." He added, "Until now, LG Innotek has only handled higher-end models with smaller quantities, but from 2021, they will also handle lower-end models with larger quantities." Furthermore, he analyzed that since O-Film lost its vendor status, Sharp and LG Innotek will supply all Apple camera modules, so although prices will decline, the increase in quantity will limit the impact on performance.

Researcher Joo said, "Rather, the strong sales of new iPhone models based on unprecedented pent-up demand (2016, 2017 models) are expected to continue until 2021, so a strategy focusing on this is necessary."

He also noted that LG Innotek's risk was its high dependence on Apple camera modules, but the proportion of camera modules in the company's operating profit is expected to decrease from 73% in 2020 to 59% in 2021 and 53% in 2022. He expressed expectations that the balance among camera modules, substrates, and automotive components will improve, enhancing earnings stability from a business portfolio perspective.

Researcher Joo emphasized, "We need to break away from the fixed notion of LG Innotek as just an Apple-related stock and now focus on the growth story of automotive components and substrates."

This content was produced with the assistance of AI translation services.