[Click eStock] "LG Innotek, Valuation Undervalued... Time to Reconsider"

Daishin Securities maintained its investment opinion of 'Buy' and a target price of 380,000 KRW for LG Innotek on the 19th.

LG Innotek's consolidated operating profit for the first quarter of this year is estimated at 147.5 billion KRW, exceeding the previous 113.5 billion KRW and the recently lowered consensus. Sales are expected to increase by 10.2% year-on-year to 4.35 trillion KRW.

Although operating profit declined due to decreased sales in the optical solutions segment caused by the slowdown in iPhone 14 sales, it is expected to surpass estimates. Additionally, the automotive electronics business is positively evaluated for turning operating profit positive through mix effects and cost reductions.

[Image source=Yonhap News]

Despite weak performance in the second quarter due to the slowdown in iPhone 14 sales, the stock price appears to have already priced this in. Attention should now be focused on sales and operating profit growth in the second half of the year, as well as the production of iPhone 15 and the increase in average selling price (ASP). Sales in the second half are estimated to increase by 59.9%, and operating profit by 862%, indicating higher visibility in earnings estimates compared to other IT companies.

iPhone 15 is expected to see increased sales compared to iPhone 14. Factors contributing to the ASP increase include the new application of a folded zoom camera and optical image stabilization (OIS), expansion to four 48-megapixel sensors, and increased production and sales proportion of the Pro models (Pro & Max), all of which are expected to significantly improve sales and operating profit in the second half.

Park Kang-ho, a researcher at Daishin Securities, analyzed, “With operating profit estimates exceeded in the first quarter, the automotive electronics business turning profitable, and clear increases in sales and profit in the second half, the current valuation is undervalued,” adding, “It is time to take another look.”

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