[Click eStock] LG Innotek's Quarterly 'Surprise Earnings'... Targeting 1 Trillion KRW Operating Profit Era

Optical Solutions and Substrate Business Smooth Sailing... Profit Improvement Expected in Automotive Components as Well

[Asia Economy Reporter Minwoo Lee] LG Innotek continues to deliver 'surprise earnings' every quarter. With its status within client companies further strengthened, it is analyzed that the company will easily surpass an operating profit of 1 trillion won, supported by the effects of the new iPhone product launch and improvements in automotive component profits.

On the 31st, Kiwoom Securities maintained its 'Buy' investment rating and target price of 290,000 won for LG Innotek based on this background. The closing price the previous day was 208,000 won.

LG Innotek recorded consolidated sales of 2.3547 trillion won and an operating profit of 151.9 billion won in the second quarter of this year. These figures represent increases of 55.93% and 178.21%, respectively, compared to the same period last year. The market consensus was also exceeded by 5.25% and 18.48%, respectively, marking a 'surprise performance.'

Strong performance is expected to continue into the third quarter. Kiwoom Securities forecasts that LG Innotek will record an operating profit of 299.1 billion won in the third quarter of this year, a 176% increase compared to the same period last year. This figure also significantly surpasses the consensus estimate of 268.7 billion won.

Optical solutions are expected to lead results beyond expectations. Positive demand forecasts for the new iPhone, coinciding with 5G replacement demand, and changes in the supply methods of camera modules and front 3D modules, combined with competitors experiencing yield issues and production disruptions due to COVID-19, are analyzed to further strengthen LG Innotek’s position within client companies. Additionally, the company is expected to maintain its global leading position in semiconductor substrates.

Although concerns about a slowdown in performance next year have arisen following consecutive 'surprise earnings' this year, these are not considered significant issues. Optical solutions are expected to greatly aid off-season operating rates with the launch of the iPhone SE 5G model in the first half of next year, and demand for 3D modules targeting new extended reality (XR) devices is anticipated to increase. In 2023, a qualitative leap is expected with the adoption of folded zoom cameras.

Automotive components are also projected to return to profitability next year as semiconductor supply issues are resolved, leading to significant profit improvements. Collaboration areas are expected to expand into the smart car sector, centered on autonomous driving cameras. Kim Jisan, head of the Kiwoom Securities Research Center, explained, "The company has a structure capable of generating over 1 trillion won in operating profit annually," adding, "Based on expected earnings this year and next, the price-to-earnings ratio (PER) is only 5.9 times and 6.3 times, respectively, indicating a need for corporate value reassessment."

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