[Click e-Stock] "LG Innotek Enters Risk Mitigation Phase... Target Price Raised"

Target Price Raised from 185,000 Won to 220,000 Won

On September 30, Meritz Securities announced that it considers LG Innotek to have entered a phase of risk mitigation, raising its target price from 185,000 won to 220,000 won. The investment rating remains 'Buy'.

Yang Seungsoo, a researcher at Meritz Securities, stated, "This year, LG Innotek's stock underperformance was driven by three factors: a slowdown in new product market share for its North American client, U.S. product-specific tariff issues, and a decline in camera module market share leading to concerns over price pressure." He added, "However, considering the North American client's announcement of large-scale investment in the U.S. and stronger-than-expected sales trends following the launch of the iPhone 17, we believe the company has entered a full-fledged risk mitigation phase." He further commented, "Despite the recent rebound in the stock price, it remains in a deep value (undervalued) range, so we expect additional upside based on a sense of relief at this point."

LG Innotek's third-quarter results this year are expected to slightly exceed market expectations. Researcher Yang analyzed, "Third-quarter revenue is projected to decrease by 12.5% year-on-year to 4.975 trillion won, while operating profit is expected to increase by 28.6% to 167.7 billion won, slightly surpassing the operating profit consensus (the average forecast by securities firms) of 165.1 billion won." He continued, "Although demand for the iPhone 17 is stronger than feared, the current solid demand is more likely to provide upside for fourth-quarter results, while foreign exchange effects will be the main driver of profit improvement in the third quarter."

In the mid- to long-term, the key variable for the stock price will be whether the company can defend its profitability against price reduction pressure. Yang explained, "This year, the North American client effectively froze the iPhone 17's selling price, meaning it could not pass on increased costs to consumers. From next year, with the introduction of artificial intelligence (AI) features, inevitable cost increases for components such as memory and batteries are expected, which will likely intensify the pressure to lower prices." He added, "While there are additional factors that could raise prices in the camera module segment, such as the introduction of variable apertures, maintaining LG Innotek's high market share and defending profitability remain ongoing challenges."

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