[Click eStock] "LG Innotek, Valuation at Historic Low Level... Target Price Up"

[Asia Economy Reporter Song Hwajeong] NH Investment & Securities raised the target price for LG Innotek from 270,000 KRW to 300,000 KRW on the 6th, stating that despite record-high earnings, the valuation remains at a historic low. The investment rating was maintained as 'Buy.'

Researcher Lee Gyuha of NH Investment & Securities explained, "We raised the target price by revising upward the earnings forecast," adding, "We increased the earnings per share estimate by 12% compared to the previous forecast, reflecting a 4.2% upward revision in North American customers' 2021 smartphone shipments to 227.4 million units (a 12.3% increase year-over-year), and slightly raised the module market share considering the exclusion of the supply chain of Chinese camera module competitor Ofilm."

Despite record-high earnings and mid-to-long-term growth potential in automotive electronics and virtual reality (VR), LG Innotek's valuation remains at a historic low. Compared to global competitors, it is trading at about a 50% discount, indicating an excessively undervalued situation. Researcher Lee said, "The reason the valuation remains at a historic low despite record earnings is due to excessive market concerns," citing "high single-customer concentration, doubts about mid-to-long-term growth potential, price declines due to single-module adoption, and market share reduction within customers caused by additional competitor entries" as representative concerns.

These concerns are rather seen as opportunities. Researcher Lee stated, "Concerns about high single-customer concentration are actually opportunities considering the shipment growth of North American companies in the second half of the year, and while price declines due to single-module adoption are limited, volume expansion is expected, making it attractive," adding, "Concerns about growth are excessive when considering mid-to-long-term growth potential in automotive electronics and VR."