Southeast Asia Remains Unaffected by COVID-19... LG Innotek Thrives Even in Off-Season

Operating Profit Expected to Approach 1 Trillion Won This Year... 40% Increase YoY
Camera Module Market Expansion Anticipated... Southeast Asia Also Avoids COVID-19 Impact

[Asia Economy Reporter Minwoo Lee] LG Innotek is expected to post solid results in the second quarter and the second half of this year, which are typically off-seasons. This is because the demand for parts from Apple, which is about to launch new products, remains strong, and LG Innotek has avoided production disruptions caused by the spread of COVID-19 in Southeast Asia, which many IT parts companies are experiencing.

On the 6th, Shinhan Financial Investment forecasted LG Innotek's sales for the second quarter of this year at 2.1562 trillion KRW and operating profit at 116.5 billion KRW. Although sales slightly decreased compared to the same period last year, operating profit is expected to increase by 113%, indicating solid performance despite the off-season. While some are concerned about Apple's price cuts and parts inventory adjustments in the second quarter, demand is judged to be robust.

The third quarter of this year is considered even more important. Hyungwoo Park, Senior Researcher at Shinhan Financial Investment, explained, "With the customer's new product launch advancing by 1 to 2 months compared to last year, parts production is also expected to be brought forward. Benefits are possible in various camera module groups such as sensor shift, ultra-wide modules, 3D SL, and ToF." He added that the COVID-19 impact on the Vietnam production supply chain, a key issue in the IT parts industry, is a "wind-free zone" because LG Innotek's main camera module factory is located domestically.

Operating profit this year is expected to increase by 40% from last year to 951.7 billion KRW. A similar level is expected to be maintained next year. LG Innotek is evaluated to have multiple growth engines. Researcher Park said, "The automotive sector is increasing sales with multiple customers and product lines, so once the shortage of automotive semiconductors is resolved, full-scale growth will be possible. In recent years, demand for color information cameras (dual/triple modules) has increased, but from 2022, the market for depth information cameras (3D for augmented reality, autonomous driving, etc.) has blossomed, and LG Innotek is expected to maintain its position as a key supplier within customers next year."

Against this backdrop, Shinhan Financial Investment maintained its 'Buy' rating and target price of 283,000 KRW for LG Innotek. The closing price on the previous trading day was 213,500 KRW.