[Click eStock] LG Innotek, 3Q Peak Season Expectations Rise

3Q Sales Expected at 3.5 Trillion Won... Operating Profit Also Expected to Surpass 3100 Billion
Optical Solutions Business Remains Strong... Impact of Apple New Product Effects

[Asia Economy Reporter Minwoo Lee] LG Innotek is expected to post strong results in the third quarter, the peak season. Sales are projected to increase across the board, from optical solutions to substrate materials and automotive components.

On the 1st, IBK Investment & Securities maintained its 'Buy' rating and target price of 300,000 KRW for LG Innotek, citing these factors. The closing price the previous day was 208,500 KRW.

For this year, on a consolidated basis, LG Innotek's third-quarter sales are estimated at 3.4684 trillion KRW with an operating profit of 316.4 billion KRW. This represents increases of 56.5% and 189.8%, respectively, compared to the same period last year. Compared to the previous quarter, sales and operating profit are expected to rise by 47.3% and 108.3%, respectively.

The sales growth is expected to be led by the optical solutions division. Sales from the optical solutions business are estimated to have increased by 66.1% from the second quarter to 2.5819 trillion KRW. This is attributed to the impact of new products from major client Apple. Starting with this product, the purchasing method has changed to supplying lenses instead of modules, but with an increase in sensor-shift models and a high market share within premium products, there is no expected change in performance improvement. Additionally, the substrate materials division is expected to grow by more than 10%. The automotive components and other business divisions are anticipated to see sales increases in the 5% range.

This performance improvement is still ongoing, according to analysis. IBK Investment & Securities identified two main pillars of LG Innotek's performance improvement: ▲ sales growth driven by overseas customers enhancing smartphone camera functions, and ▲ business suspension of underperforming divisions and cost structure improvements. The latter is still in progress, and although there were concerns about the former, it is expected to be resolved with this year's results.

Kim Unho, a researcher at IBK Investment & Securities, explained, "We believe that efforts to enhance camera performance for overseas customers have not yet reached their conclusion, so additional growth is still valid," adding, "There remains room for performance improvement through average selling price (ASP) increases in 2022 as well."

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