LG Innotek, Who Cried Because of Apple, Finds Smile Again Thanks to Apple

Apple Surge Lifts LG Innotek to Rebound in a Day
Stock Slump Continues Due to Last Year's iPhone Sales Slump
Strong Earnings Expected to Drive Stock Upward Trend

LG Innotek, which was downcast last year due to Apple, is regaining its smile. With concerns stemming from Apple somewhat alleviated, strong earnings exceeding market expectations are anticipated not only in the first quarter but also in the second quarter, drawing attention to whether the stock price's upward momentum can gain further traction.

On the 13th, according to the Korea Exchange, LG Innotek closed at 251,000 KRW, soaring 9.37% from the previous day. Over the past two days, the stock price fluctuated in response to Apple's stock movements. Earlier, on the 10th (local time), Apple announced its AI system, 'Apple Intelligence,' at the annual Worldwide Developers Conference (WWDC) 2024, but the market reacted that there was nothing new and it fell short of expectations, causing Apple's stock price to drop 1.9% that day. Consequently, Apple-related stocks in Korea showed weakness, and LG Innotek's stock price fell 5.56%. However, with positive outlooks emerging from Wall Street, the mood completely changed within a day. Apple closed at $207.15, up 7.26% from the previous day, surpassing $200 for the first time ever. Influenced by this, LG Innotek also succeeded in rebounding within a day.

LG Innotek, considered a representative Apple-related stock in Korea, struggled last year due to sluggish iPhone sales and other reasons. The stock price, which was in the 300,000 KRW range a year ago, has been on a continuous downward trend and fell below 200,000 KRW this year. However, after achieving earnings that exceeded market expectations in the first quarter of this year, the stock price began to recover. Since the end of April, the stock price has shown a steady upward trend. Compared to the 52-week low of 179,500 KRW recorded intraday on April 19, it has risen by nearly 40%.

The market's focus is on whether LG Innotek's stock price recovery will continue. Dongwon Kim, a researcher at KB Securities, said, "LG Innotek's stock price has fallen 26.2% over the past year, with a 12-month price-to-book ratio (PBR) of 0.9 times and a price-to-earnings ratio (PER) of 6.6 times, below the historical 10-year average bottom (PBR 1.0 times). LG Innotek, with 84% of its sales from iPhones, is expected to see a rapid revaluation of its stock price going forward due to performance improvements from the upcoming iPhone upgrade cycle starting in the second half of this year and profit structure diversification effects from acquiring new customers among North American big tech companies," he said.

Solid earnings are expected to support the stock price's upward trend. LG Innotek's second-quarter earnings are forecasted to exceed market expectations. Kangho Park, a researcher at Daishin Securities, analyzed, "LG Innotek's second-quarter sales are estimated to increase 15.6% year-on-year to 4.52 trillion KRW, and operating profit is expected to surge 481.6% to 106.8 billion KRW, marking two consecutive quarters of operating profit surpassing consensus (average securities firm forecasts). iPhone 15 sales proceeded well within the expected range in the second quarter, and favorable exchange rate effects are also expected to further improve margins." The earnings growth in the second half of the year is expected to be even steeper. Researcher Kim predicted, "Operating profit in the second half of this year will be 821.4 billion KRW, about three times the first half (284.8 billion KRW)."

With the Apple effect and favorable earnings expected, securities firms have been raising LG Innotek's target stock price one after another this month. KB Securities raised LG Innotek's target price by 13.3%, from 300,000 KRW to 340,000 KRW. SK Securities raised it from 300,000 KRW to 345,000 KRW, and Hana Securities raised it to 326,000 KRW. Rokho Kim, a researcher at Hana Securities, said, "Since the period is expected to feature differentiated AI-related functions and earnings are also favorable, the stock price momentum is considered valid until sales volume is confirmed."

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