[Click eStock] "LG Innotek, Record High Operating Profit Thanks to 'Pro'... 4Q Expected to Exceed Expectations"

[Asia Economy Reporter Myunghwan Lee] Kiwoom Securities announced on the 27th that it maintains a buy rating and a target price of 470,000 KRW for LG Innotek. The company also forecasted that LG Innotek will deliver better-than-expected performance in the fourth quarter of this year.

LG Innotek's consolidated operating profit for the third quarter of this year was preliminarily estimated at 444.8 billion KRW, a 32% increase compared to the same period last year. This not only met the already high market consensus of 426 billion KRW but also marked the highest quarterly operating profit ever recorded.

Kiwoom Securities pointed out that the optical solutions division led the strong performance with better-than-expected sales. This was attributed to robust shipments of cameras and ToF (Time of Flight) modules for Apple's iPhone 14 Pro series, price increases due to higher pixel counts in the main cameras, and new supply of front cameras equipped with autofocus.

The automotive components segment was also positively evaluated for achieving a slight return to profitability, driven by electric vehicle and autonomous driving parts, as the supply issues for automotive semiconductors eased. Among substrate materials, semiconductor substrates continued growth centered on RF-SiP (Radio Frequency System-in-Package) and 5G AiP (Antenna-in-Package) for North American customers as the final demand source, while display components were affected by the TV market downturn.

Kiwoom Securities projected LG Innotek's operating profit for the fourth quarter to be 604.7 billion KRW, a 41% increase year-on-year. This figure exceeds the market expectation of 571 billion KRW.

Although sales of the standard models of the new iPhone series, 'iPhone 14' and 'iPhone 14 Plus,' have been sluggish, the high-end models 'iPhone 14 Pro' and 'iPhone 14 Pro Max' are performing well, which is seen as positive. Apple is adjusting its production plans to focus on the Pro series, and the sales proportion of the iPhone 14 Pro series is expected to rise by about 13 percentage points from the previous generation, exceeding 60%. This favorable environment benefits LG Innotek, which has high exposure to the Pro series, and the exchange rate conditions are also positive during the period when sales to North American customers are maximized.

The automotive components segment is expected to maintain its profitability in the fourth quarter, and attention should be paid to the platform strategy through modularization. With the expansion of the Mexico plant, LG Innotek plans to actively respond to North American OEM demand, and it is also expected to benefit from the Inflation Reduction Act (IRA).

Kim Jisan, Head of Kiwoom Securities Research Center, stated, "Profit growth driven by optical solutions is expected to continue next year," adding, "This will be supported by price increases and strengthened positioning due to the adoption of the new iPhone folded zoom camera, expansion of front camera sales, benefits from the launch of major customers' first extended reality (XR) devices, and growth in autonomous driving cameras."

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