[Click eStock] LG Innotek, Strong Performance Across All Divisions... Target Price Up 14%

KB Securities Report

[Asia Economy Reporter Minji Lee] KB Securities maintained a buy rating on LG Innotek on the 21st and raised the target price by 14% from the previous level to 400,000 KRW.

The target price increase is based on the expectation that LG Innotek's optical components and automotive components will be installed in Apple's future metaverse hardware devices and autonomous vehicles. Additionally, the semiconductor substrate business, which is expected to face supply shortages over the next three years, is projected to grow about twice compared to the past. The hardware specifications of the iPhone 14, scheduled for release in the second half of next year, will undergo a full change for the first time in seven years since the iPhone 6S in 2015, which is expected to lead to price increases and market share expansion.

LG Innotek is evaluated to have secured an optimized autonomous vehicle business structure and is expected to be the biggest beneficiary of the expanding autonomous vehicle market. This is because LG Innotek possesses core optical and communication technologies for autonomous vehicles and has completed mass production verification for autonomous vehicle parts from global automobile manufacturers.

In particular, LG Innotek's automotive components business, which has secured an order backlog of 10 trillion KRW, is expected to receive new orders exceeding 3 trillion KRW annually in the future. Next year, it is analyzed that the company will expand new supplies of core autonomous vehicle parts such as LiDAR, radar, V2X modules, cameras, and motor sensors to more than 20 global automobile companies. Dongwon Kim, a researcher at KB Securities, said, "The automotive components business is expected to turn profitable from the second half of next year, entering a full-scale performance turnaround phase."

Despite the recent stock price increase, LG Innotek still has ample room for further growth. Based on next year's estimated performance, the current price-to-earnings ratio (PER) is 7.9 times, indicating undervaluation. Researcher Dongwon Kim analyzed, "The target price of 400,000 KRW applies a PER of 10 for next year but practically does not reflect the value of new businesses such as metaverse, XR devices, autonomous vehicles, and FC-BGA. The operating profit contribution of the substrate business, which is expected to experience a structural long-term boom, will expand from 21% of total profit last year to 34% in 2023."

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