[Click e-Stock] "LG Innotek Still Undervalued Despite Short-Term Surge... Target Price Raised"

On April 21, Meritz Securities stated that despite the recent sharp short-term rise in LG Innotek's share price, the company's valuation remains undervalued. Accordingly, Meritz Securities raised its target price from 3.6 million won to 4.3 million won, while maintaining its "Buy" investment rating.

Seungsoo Yang, an analyst at Meritz Securities, said, "We have raised the fair value of LG Innotek by 19.4% compared to the previous estimate, reflecting an upward revision of the 2026 and 2027 operating profit forecasts by 6.6% and 4.3%, respectively, as well as an adjustment of the target multiple from 1.3 times to 1.5 times." He explained, "Even though the stock price has recently rebounded sharply in the short term, the company remains undervalued compared to global printed circuit board (PCB) peers and past valuations, so its valuation attractiveness is still valid."

The optical solutions division is expected to maintain a stable performance trend, driven by the client's aggressive shipping strategy and the effect of newly introducing the variable aperture technology. Analyst Yang predicted, "The operating profit of the optical solutions division in 2026 and 2027 will increase by 39.2% and 9.4% year-on-year, respectively. In 2026, robust growth is expected as the low base effect, the client's aggressive shipping strategy, an increase in average selling price (ASP) due to the adoption of the variable aperture, and increased market share within the iPhone, all take effect simultaneously. In 2027, performance growth is expected to continue as the product lineup expands from four models in 2026 to seven models with the re-launch of general and Air models, as well as the introduction of a new 20th anniversary model."

The contribution of the package solutions division to the company's total operating profit is expected to increase progressively from 19% in 2025 to 23% this year and to 29% in 2027. Analyst Yang stated, "Thanks to increased shipments of wireless radio frequency System in Package (RF-SiP), which has relatively high profitability, LG Innotek will be able to maintain higher profitability than other substrate manufacturers. In addition, the flip-chip ball grid array (FC-BGA), which has so far acted as a drag on the division's performance due to large-scale losses, is expected to become a key driver of profit improvement going forward. This is because the trickle-down effect to LG Innotek is expanding as global leading companies focus on responding to artificial intelligence (AI) demand," he analyzed.

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