[Click eStock] "LG Innotek, Appropriate Market Cap 10 Trillion Won... Target Price Up"

[Asia Economy Reporter Song Hwajeong] Shinhan Financial Investment evaluated LG Innotek on the 24th, expecting the highest quarterly performance since its founding in Q4 this year and securing growth drivers for 2022?2023, and raised the target stock price from the previous 306,000 KRW to 402,000 KRW. The investment opinion was maintained as 'Buy.'

Researcher Park Hyungwoo of Shinhan Financial Investment said, "Operating profit in Q4 this year is expected to reach 422.2 billion KRW, a 23% increase compared to the same period last year, marking the highest performance since the company's founding," adding, "This is due to the peak season and the boom in cameras, substrates, and materials."

The camera boom is expected to continue next year, and growth momentum is anticipated to accelerate in 2023. Researcher Park analyzed, "Many investors are concerned about earnings decline in 2022, but operating profit in 2022 is expected to increase by 8% to 1.36 trillion KRW, indicating growth compared to the previous year rather than a base effect," and "Furthermore, the expansion of camera demand channels due to the emergence of new application markets has secured several years' worth of growth drivers through 2023."

The camera market condition in 2022 is expected to be more robust than initially anticipated. Smartphone manufacturers are enhancing the completeness of main, ultra-wide, and ultra modules within multi-cameras, and an increase in average selling price (ASP) due to camera upgrades is also expected. Researcher Park explained, "Due to production disruptions at competitors, a favorable market share compared to competitors is anticipated," and "Based on a strong cooperative relationship with clients, supply of cameras, communication modules, and packaging substrates is increasing."

In 2023, the application of cameras is expected to expand. The biggest beneficiary components in augmented reality (AR) and virtual reality (VR) are 3D modules, and LG Innotek is the global No.1 supplier of 3D modules. Researcher Park said, "Having already gained development and supply experience with numerous platform companies, ultimately a new market worth trillions of KRW will emerge." The introduction of folded telephoto modules is also expected among North American manufacturers. The ASP of folded modules is 10,000 to 20,000 KRW higher than that of general telephoto modules. Shipments by North American manufacturers greatly exceed 200 million units. Additionally, expansion of high-value-added packaging substrates is underway. Significant earnings contributions are expected from 2023, with profitability at the highest domestic level.

Researcher Park stated, "LG Innotek's target stock price reflects a price-to-earnings ratio (PER) of 10 times, which is typical for IT components, applied to the 2022 earnings per share (EPS) of 40,196 KRW," adding, "The current stock price corresponds to a 2022 PER of 6.9 times, and a PER below 10 times is inexplicable given the secured growth drivers for 2022 and 2023. A target multiple (valuation) considering 2023 is required."

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