[Click eStock] "LG Innotek, 4Q Expectations Rise with New iPhone Launch"

3Q Weak Performance to Be Recovered in 4Q with iPhone Launch
4Q Sales Expected at 3.3 Trillion KRW and Operating Profit at 340 Billion KRW

[Asia Economy Reporter Minwoo Lee] Due to the delay in the launch of the new iPhone, LG Innotek's operating profit for the third quarter is expected to remain in the 90 billion KRW range. In the fourth quarter, when iPhone sales fully ramp up, the performance concentration is expected to intensify further, with operating profit projected to exceed 340 billion KRW.

On the 8th, Cape Investment & Securities forecasted that LG Innotek would record sales of 1.975 trillion KRW and operating profit of 91.5 billion KRW in the third quarter of this year. Compared to the same period last year, sales are expected to decrease by 19.3% and operating profit by 51%. However, compared to the previous quarter, sales and operating profit are expected to increase by 28.3% and 113.1%, respectively. Seongsun Park, a researcher at Cape Investment & Securities, explained, "Despite the delay in the new iPhone launch, camera module supply began last month, significantly improving the optical solutions division's performance compared to the previous quarter. Additionally, the substrate materials segment is expected to record sales up 8.9% from the previous quarter due to production of the iPhone's antenna-in-package (AiP) substrates." However, the automotive division is expected to fall short of initial expectations due to the resurgence of COVID-19 and other factors.

With the iPhone launch delayed, the performance concentration in the fourth quarter is expected to become even more pronounced. Fourth-quarter sales are forecasted at 3.393 trillion KRW, with operating profit at 341 billion KRW. This represents a 14.4% increase in sales and a 62.9% increase in operating profit compared to the same period last year.

Meanwhile, concerns about the optical solutions division are emerging in the market under various scenarios. Researcher Park judged that the camera alignment and ToF (Time-of-Flight) sensor dualization should be understood as part of the vendor dualization concept that has been ongoing for some time. Rather, the exclusive structure of the triple camera system that has continued for two years was an unusual situation. Park explained, "LG Innotek typically achieved high market share for upgraded modules after dualization. In other words, the increase in sales price of new modules and the rise in supply volume due to the increase in applicable models despite dualization of existing modules make it unlikely that the optical solutions division's performance will be significantly damaged."

The upcoming new iPhone is expected to benefit from a surge in previously sluggish mobile demand, and as the primary camera module vendor, LG Innotek is also anticipated to deliver strong performance. Against this backdrop, Cape Investment & Securities maintained a 'Buy' rating and a target price of 220,000 KRW for LG Innotek. The closing price on the previous day was 166,000 KRW.