[Click eStock] "LG Innotek Meets Lowered Expectations for Q3 Performance"... Target Price ↓

Kiwoom Securities maintained a buy rating on LG Innotek on the 26th while lowering the target price from 380,000 KRW to 350,000 KRW.

LG Innotek's operating profit for the third quarter of this year was 183.4 billion KRW, down 59% year-on-year, meeting the lowered market expectations.

Researcher Kim Jisan of Kiwoom Securities explained, "The operating rate of the optical solutions was insufficient due to delays in the initial mass production of strategic customers' new models, and semiconductor substrates were sluggish along with weak set demand," adding, "Costs for preparing the commercialization of FC-BGA have increased."

Although optical solutions showed favorable sales due to the average selling price (ASP) increase from new model specification improvements, it was difficult to offset the increased fixed cost burden caused by accumulated expansion investments. On the other hand, automotive components turned profitable as supply increased mainly for vehicle communication and lighting despite concerns over a slowdown in electric vehicle demand, combined with the results of cost improvement activities.

Researcher Kim said, "Looking at the initial sales performance of the iPhone 15 series, in China, it slightly lags behind the previous model due to the 'iPhone ban,' but in the United States, it significantly exceeds the previous model," adding, "Despite the weak smartphone demand environment, expected order volumes from customers are being maintained, and the strong sales of the Pro Max model equipped with a folded zoom camera are particularly notable, which is favorable for LG Innotek."

LG Innotek's operating profit for the fourth quarter is expected to reach a record high of 535.7 billion KRW, up 215% year-on-year. This is expected to be driven by the ASP increase of optical solutions, mix improvement centered on the Pro series, and the effect of increased operating rates.

Researcher Kim also stated, "Within substrate materials, semiconductor substrates are rebounding mainly for strategic customers' smartphone RF-SiP and AiP, and photomasks will overcome the off-season thanks to the diversification of supply sources by major customers," adding, "One-time cost factors that used to recur at year-end will also be minimized."

He continued, "Points expected for additional growth next year include the continued ASP increase in optical solutions based on the increase in models adopting folded zoom and the expanded application of 48-megapixel cameras," adding, "Autonomous driving cameras will see reinforced growth with the operation of a new line at the Mexico plant, and FC-BGA plans to start full-scale mass production in the first half of the year and attempt early product advancement."

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