[Click eStock] "LG Innotek, Earnings Estimates Revised Upward"... Target Price ↑

On the 16th, KB Securities upgraded its investment opinion on LG Innotek to "Buy" and raised the target price from 330,000 KRW to 390,000 KRW.

Dongwon Kim, a researcher at KB Securities, explained, "The target price upgrade is due to upward revisions of operating profit for Q2 this year, the start of mass production of iPhone 15 components in Q3, and the bottoming out of semiconductor substrate demand, leading us to revise upward the earnings estimates for this year and next." He added, "LG Innotek's operating profit ratio is expected to show a clear pattern of lower earnings in the first half and higher earnings in the second half, with 15% and 85% respectively, making the visibility of second-half performance even clearer."

He continued, "The Q2 performance, initially expected to be in the red, is now estimated to achieve profitability due to increased sales of optical solutions and semiconductor substrates, as well as a more favorable won-dollar exchange rate than initially feared. Quarterly earnings are expected to hit a low in Q2 and a high in Q4."

LG Innotek's Q2 sales are forecasted to decrease by 9% year-on-year to 3.4 trillion KRW, while operating profit is expected to drop by 92% to 23.7 billion KRW, surpassing market consensus estimates.

This is because sales growth and the won-dollar exchange rate are expected to be better than initially feared. Especially from Q3, with the full-scale mass production of iPhone 15 components, LG Innotek's quarterly performance is anticipated to improve significantly due to the rise in average selling price (ASP) of camera modules caused by changes in the iPhone 15 camera form factor and the supply of new components.

Researcher Kim stated, "Demand for the iPhone 15, scheduled for release in the second half of this year, is expected to increase by more than 10% year-on-year due to upgraded camera specifications and replacement demand from iPhone 12 and 13 users." He added, "The optical solutions business, which accounts for 83% of LG Innotek's total sales, is expected to see an ASP increase due to the iPhone 15 camera upgrade. Provided there are no production disruptions like last year, both volume and price are expected to rise simultaneously." He further noted, "LG Innotek's performance this year is estimated at 20.7 trillion KRW in sales and 1.1 trillion KRW in operating profit, with a clear lower first half and higher second half earnings pattern of 15% and 85%, respectively."

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