[Click eStock] "LG Innotek Expected to Exceed Q4 Earnings Estimates"
On the 3rd, KB Securities maintained its 'Buy' rating and target price of 390,000 KRW for LG Innotek, expecting the company's Q4 earnings to exceed market expectations.
Dongwon Kim, a researcher at KB Securities, explained, "Contrary to market concerns, iPhone 15 demand in Q4 is expected to surpass forecasts. Considering the already lowered earnings expectations, LG Innotek's Q4 performance is highly likely to exceed predictions."
The reason for the strong iPhone 15 demand in Q4 is that the Chinese market, which recorded a sales decline during the first three weeks after launch, shifted to a rapid recovery trend starting in October. Additionally, the component supply shortage issue was resolved from October, normalizing the supply of the highest-end iPhone 15 model, which has the highest consumer preference. Researcher Kim stated, "LG Innotek, holding the top 80% market share for the camera module of the highest-end iPhone 15 model, will continue to have upside potential in its Q4 earnings."
Record quarterly earnings are expected in Q4. KB Securities estimated LG Innotek's Q4 revenue and operating profit at 7.2 trillion KRW and 551.7 billion KRW, respectively, representing increases of 51% and 201% compared to the previous quarter. Kim said, "The current consensus for Q4 operating profit is just over 500 billion KRW, but considering increased component orders and exchange rate effects, Q4 operating profit is expected to exceed market estimates by up to 20%."
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The catalyst for LG Innotek's stock price increase is likely to be the better-than-expected Q4 iPhone 15 demand. Kim noted, "Considering the Q4 peak season demand trends for iPhone 15 (China's Guanggun Festival, US Black Friday), this year's iPhone 15 shipments are estimated at 87 million units, a 7% increase from the previous year, exceeding the recently lowered market forecast of 72 million units by 20%. Given that LG Innotek's current stock price is below a price-to-book ratio (PBR) of 1, which is historically the lowest in the past decade, it is time to focus on the potential for price appreciation rather than downside risk."
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