Record-Breaking Performance... But IT Component Stocks Are Stalling

Samsung Electro-Mechanics and LG Innotek Both Forecast Record High Earnings
Both Companies Expected to Surpass 1 Trillion KRW Operating Profit
Stock Prices Decline... "Strong Earnings but Excessively Undervalued"

[Asia Economy Reporter Minwoo Lee] Despite IT component stocks such as Samsung Electro-Mechanics and LG Innotek approaching record-high earnings, their stock prices have struggled to recover from sluggishness.

According to the Korea Exchange on the 12th, LG Innotek's stock price was recorded at 195,000 KRW as of 11:27 AM, down 1.02% from the previous trading day. Compared to the closing price on the 14th of last month, it has fallen about 14.3%. It has been on a downward trend without a rebound for a month. Samsung Electro-Mechanics is in a similar situation. At the same time, its stock price dropped 4.50% from the previous trading day to 159,000 KRW. It has also continued to decline over the past month, falling about 15% compared to the closing price on the 14th of last month. Compared to the KOSPI's 6.99% drop during the same period, the decline is more than twice as large.

Given the expected solid earnings, analysts say the stocks are excessively undervalued. Since key components such as multilayer ceramic capacitors (MLCC) and camera modules are expected to maintain high demand in the fourth quarter, both companies are projected to surpass annual operating profits of 1 trillion KRW. According to financial information analysis firm FnGuide, Samsung Electro-Mechanics’ consensus earnings forecast for this year is 9.7967 trillion KRW in sales and 1.4458 trillion KRW in operating profit. In particular, operating profit is expected to exceed 1.1499 trillion KRW recorded in 2018, setting a new all-time high.

LG Innotek’s earnings forecast is 12.5953 trillion KRW in sales and 1.1436 trillion KRW in operating profit. It is expected to surpass 1 trillion KRW in operating profit for the first time ever, marking a record high for four consecutive years. Ji-san Kim, a researcher at Kiwoom Securities, explained, "LG Electronics is expanding achievements in advanced driver-assistance systems (ADAS) and autonomous driving camera fields through collaboration, and next year, positive factors remain such as the launch of new iPhone models and demand for extended reality (XR) devices targeting the metaverse (expanded virtual world)." He added, "Despite the upward trend in earnings estimates, the stock price has undergone adjustments, falling to a price-to-earnings ratio (PER) of 4.8 times based on this year, indicating excessive undervaluation."

In the short term, the smartphone shipment volume for September, which will be announced soon, is also seen as a key factor. Rokho Kim, a researcher at Hana Financial Investment, analyzed, "Chinese smartphone shipments have been weaker than expected, so the key point to watch in the upcoming September shipment announcement is how it compares to the August shipment volume."

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