[Click eStock] "LG Innotek, 4Q Earnings Weakness Priced In... Momentum Remains Valid"

[Asia Economy Reporter Kwon Jae-hee] Shinhan Investment Corp. maintained its 'Buy' rating and target price of 450,000 KRW for LG Innotek on the 19th.

LG Innotek's Q4 operating profit is expected to be 442.6 billion KRW, below the initial estimate of 596.3 billion KRW. The decline in earnings is due to the drop in the KRW-USD exchange rate and production disruptions in the Chinese smartphone supply chain, making the short-term performance disappointing. However, the stock price has already fallen, and the weak Q4 this year is expected to serve as a base effect for next year.

Among major electrical and electronics stocks, LG Innotek has the highest visibility for earnings growth next year. LG Innotek's annual operating profit is forecasted to increase from 1.5 trillion KRW this year to 1.7 trillion KRW next year. Although the first half of next year may see a decline compared to the previous year due to the inventory accumulation (negative base effect) in 2022, improvements are likely in the second half thanks to factors such as the rise in average selling price (ASP) of cameras, increased sales proportion of high-pixel and front cameras, and new supply of folded zoom modules.

Researcher Park Hyung-woo of Shinhan Investment Corp. analyzed, "The current stock price has fallen about 32% from its peak (March 11), and the Q4 earnings weakness has already been largely reflected in the stock price," adding, "Even assuming weak smartphone sales, momentum in camera components has not disappeared."

Researcher Park added, "In an environment of ongoing macro uncertainty, attention should be paid to companies that increase market share or prices or supply new products, and among major IT stocks, that is LG Innotek."

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