[Click eStock] "LG Innotek, Optical Solutions Division Expected to Exceed Performance Expectations"

Kiwoom Securities Report

[Asia Economy Reporter Minji Lee] On the 9th, Kiwoom Securities forecasted that LG Innotek will deliver its largest-ever performance this year, driven by growth in the optical solutions division. The investment opinion was maintained as Outperform, with a target price of 330,000 KRW.

Kiwoom Securities projected LG Innotek's operating profit for the fourth quarter to be 473.1 billion KRW, a 38% increase compared to the same period last year. This significantly exceeds market expectations (437.6 billion KRW) and is expected to close the year with a record-high performance.

The optical solutions division is analyzed to deliver results beyond expectations. The production disruption scale of the new iPhone due to component supply shortages is expected to be smaller than concerns. As production disruptions among competitors and component bottlenecks ease, the production volume of the new iPhone is increasing, leading to a corresponding increase in the company's volume. During the supply shortage phase, LG Innotek's position within its main customers is further strengthened, leading the supply of high-performance sensor-shift cameras.

Demand for the iPhone 13 series has been confirmed as positive. According to Counterpoint, thanks to the simultaneous release effect of four models, sales of the iPhone 13 series in the eight weeks following its launch increased by 8% in the U.S. and 20% in China compared to the previous generation. The year-end sales volume of the iPhone 13 series is expected to reach 63 million units, a 21% increase over the previous generation. Apple recently achieved the number one market share for the first time ever in China, replacing Huawei and strengthening its dominance in the Chinese premium phone market.

Ji-san Kim, a researcher at Kiwoom Securities, said, “Although the dominant view is that profit growth will be difficult next year due to the momentum of iPhone 12 and 13 overlapping and this year's outstanding performance, if additional growth is possible, a valuation reappraisal is expected.”

Positive variables include the release of the budget iPhone SE 3 in the first half of the year and potential improvements to the camera of the new iPhone in the second half. Additionally, semiconductor substrates are expected to drive performance improvements in the substrate materials business division. Maintaining top competitiveness in communication substrates such as RF-SiP and 5G antenna substrates, the division is expected to achieve sales in the 1 trillion KRW range. Entering the FC-BGA market and securing a foundation for sustained growth could lead to a structural boom. The tightly supplied Tape Substrate is expected to see increased demand alongside the trend toward high-resolution TVs, and photo masks are anticipated to support sales growth with demand for 10.5-generation substrates.

Researcher Kim Ji-san analyzed, “Automotive components will overcome semiconductor supply shortage issues and attempt to turn profitable. In the metaverse XR device market, although initial sales volume is limited, LG Innotek is leading the supply of cameras and ToF 3D sensing modules.”

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