[Click eStock] "Strong Performance Even in Off-Season... LG Innotek Expected to Surpass 300 Billion KRW Operating Profit in 1Q"

Expecting Benefits Across Various Camera Business Areas... Forecast to Break Record High Performance for 3 Consecutive Years

[Asia Economy Reporter Minwoo Lee] LG Innotek is expected to achieve strong performance in the first quarter of this year despite it being the off-season. This is due to the North American customer's new product launch, originally scheduled for the end of last year, being postponed to the first half of this year, resulting in performance at the level of the peak season.

On the 25th, Shinhan Financial Investment forecasted that LG Innotek would record consolidated sales of 2.8036 trillion KRW and an operating profit of 306.9 billion KRW in the first quarter of this year. This represents increases of 39% and 75%, respectively, compared to the same period last year. The operating profit also significantly exceeds the market consensus of 233.5 billion KRW. Hyungwoo Park, Senior Researcher at Shinhan Financial Investment, explained, "Due to the delay in the launch of some flagship smartphones by the North American customer last year (from September to November), the demand for related components has been postponed to the first half of this year," adding, "Despite the seasonal off-season, strong performance at the level of the peak season is highly likely."

Operating profit for the second quarter is expected to be 99.3 billion KRW. Although it will decrease compared to the previous quarter due to seasonal factors, it is projected to increase by 82% compared to the same period last year. The total operating profit for this year is expected to reach 898.3 billion KRW, a 32% increase from the previous year, marking the highest performance for three consecutive years.

In particular, the camera business (optical solutions) is expected to benefit in various ways. First, the application of sensor-shift cameras, introduced for the first time last year, is expected to increase, raising the average selling price (ASP) of cameras. Upgrades to ultra-wide cameras are also anticipated. Despite the adoption of fingerprint recognition, sales growth of facial recognition modules is expected to continue. Time of Flight (ToF) cameras are expected to be actively adopted beyond this year into 2022, influenced by the emergence of virtual reality (VR) and augmented reality (AR) markets.

Some concerns have been raised about the dualization of camera production structures starting in the second half of this year. However, the benefits from camera upgrades are analyzed to be greater. Senior Researcher Park stated, "The mid- to long-term growth driver in the automotive parts sector has a current accumulated order backlog of 10 trillion KRW despite intense order quality adjustments over the past two years," and added, "In the smartphone industry, there are concerns about the procurement of system semiconductors (AP, RFIC, CIS, DDIC) in the second quarter, but fortunately, LG Innotek's strategic customers consider the second quarter an off-season, so the impact is expected to be relatively small."

Based on these factors, Shinhan Financial Investment maintained a 'Buy' investment rating and a target price of 275,000 KRW for LG Innotek. The closing price on the previous day was 203,500 KRW.

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