[Click eStock] "LG Innotek, 2Q Earnings Visibility Secured... Should Increase Weight"

Ebest Investment & Securities maintained its investment opinion of 'Buy' and target price of 380,000 KRW for LG Innotek on the 27th.

In the first quarter of this year, LG Innotek's performance exceeded consensus with sales of 4.4 trillion KRW and operating profit of 145.3 billion KRW. In the optical solutions segment, sales increased by 14.8% year-on-year to 3.5 trillion KRW, but the operating margin sharply declined from 8.2% to 2.9%. The poor profitability was due to increased depreciation expenses from higher CAPEX compared to the past, increased fixed cost burden from low utilization rates, limited improvement in module profitability due to rising prices of key components and exchange rate effects. The substrate materials segment showed weak performance due to decreased shipments and price declines in the package segment, but the automotive electronics segment turned profitable due to price increases.

This year’s performance is estimated at sales of 21.2 trillion KRW and operating profit of 1.1 trillion KRW. Due to the slowdown in iPhone 14 sales, the second quarter is expected to record a loss, and the overall yearly performance is projected to clearly show a seasonal pattern of low in the first half and high in the second half. Strategic customers are understood to have shipped the iPhone 15 earlier than the previous model in the second quarter and are adopting aggressive distribution strategies. The iPhone 15 is expected to feature a 480,000-pixel camera on all models, and LG Innotek is set to exclusively supply the folded zoom module, which is expected to significantly benefit from the average selling price (ASP) increase. Additionally, internalizing the actuator is expected to reduce costs and contribute to improved profitability.

Kim Kwangsoo, a researcher at Ebest Investment & Securities, stated, “Concerns about first-quarter performance due to weak iPhone sales have already been reflected in the stock price. While uncertainties remain for other IT companies due to sluggish industry conditions, LG Innotek’s second quarter, when earnings visibility is secured, is approaching, making it a time to consider increasing exposure.”

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