[Click eStock] LG Innotek Faces Negative Growth Next Year... Target Price Downgraded

[Asia Economy Reporter Junho Hwang] Samsung Securities revised LG Innotek's target stock price down to 330,000 KRW and downgraded its investment opinion to HOLD on the 29th, anticipating negative growth next year.

Samsung Securities expects shipments from U.S. clients to decrease by 4.3%, from 231 million units this year to 221 million units next year. They also forecast that new product shipments in the Americas next year will be about 77.5 million units, similar to this year’s level.

However, due to LG Innotek’s full-scale entry into front cameras this year and the introduction of folded zoom next year, the company’s camera module growth potential is considered high. They estimate next year’s camera module sales to increase by 3% year-on-year to 16.5 trillion KRW, with 4.6 trillion KRW coming from new component sales. Especially, models equipped with folded zoom are expected to expand from one model next year to two models in 2024, with growth continuing through 2025.

However, they anticipate that the increasing proportion of camera costs within client companies’ material expenses will reduce the potential for further price increases, which is expected to be one of the concerns for investors. Folded zoom is projected to record lower profitability compared to the early stages of existing new products (such as triple cameras and sensor shift).

Researcher Jongwook Lee of Samsung Securities stated, "We estimate the operating profit for Q4 this year to decline by 9.1% to 539.8 billion KRW," adding, "This figure reflects decreased orders due to reduced client demand and production disruptions of finished products, exchange rate declines, and a high base effect in the first half of this year." He continued, "Negative growth in operating profit seems inevitable until Q2 next year," and added, "We are revising next year’s operating profit down by 10.2%, from 1.73 trillion KRW to 1.55 trillion KRW."

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