[Click eStock] "LG Innotek, Strong Q1 Performance and Momentum in Automotive Components... Target Price Up"

[Asia Economy Reporter Song Hwajeong] Hana Financial Investment raised the target price for LG Innotek from 264,000 KRW to 270,000 KRW on the 13th, citing strong first-quarter earnings and expected valuation reappraisal driven by momentum in automotive components. The investment opinion was maintained as 'Buy.'

Kim Rokho, a researcher at Hana Financial Investment, said, "We raised the target price by revising this year's operating profit upward by 18% compared to the previous estimate. Despite changes in the camera module supply structure, we believe LG Innotek's position and competitiveness will remain stable. Although automotive components have not yet contributed to the operating value calculation, there is still room for valuation reappraisal through turning a profit and proving competitiveness."

LG Innotek is expected to record first-quarter results exceeding market consensus this year. Hana Financial Investment estimated LG Innotek's first-quarter sales at 3.2132 trillion KRW and operating profit at 336.8 billion KRW, representing increases of 63% and 92%, respectively, compared to the same period last year. Researcher Kim analyzed, "These results exceed the currently rising consensus by 13% and 25%, respectively. The strong sales of the iPhone 12 series, especially the Pro Max model, led to LG Innotek's optical solutions segment outperforming previous forecasts, which is the main reason for the strong performance." Previously, the sales decline between the fourth quarter and the first quarter was about 40-60%, but this model was released 1-2 months later than usual, resulting in an estimated decline of only around 20%. Kim added, "This is the highest operating profit for the first quarter, and the difference from the fourth quarter is only about 2%."

The future key point for LG Innotek is proving the competitiveness of automotive components and the resulting valuation reappraisal. The automotive components division, which had recorded losses for several years, is expected to turn a profit annually this year. Researcher Kim explained, "This is because the quality of sales itself has improved based on the cleanup of loss-making orders over the past two years. Within automotive components, camera modules, which have high visibility for external growth, account for more than 20% of sales within the division, and North American customers have also been secured, so we believe competitiveness has already been proven."