[Click eStock] "LG Innotek Enters Earnings Surprise Cycle... Target Price Up"

[Asia Economy Reporter Song Hwajeong] On the 30th, NH Investment & Securities raised the target price of LG Innotek from 300,000 KRW to 350,000 KRW, anticipating the start of a full-scale earnings surprise cycle in the second half of the year. The investment rating was maintained as 'Buy.'

Researcher Lee Gyuha of NH Investment & Securities explained, "We raised the earnings per share forecast by about 20%, which led to an upward revision of the target price. The reason for the upward revision of the earnings forecast is that the sensor-shift adoption is expanding in new smartphones from North American clients, so we increased the selling price of triple cameras by about 10% compared to before, raised the market share of ToF (Time of Flight) modules, which had been conservatively estimated, by 15 percentage points, and considered improvements in substrate profitability."

LG Innotek's operating profit in the second quarter recorded 151.9 billion KRW, a 253.9% increase compared to the same period last year, surpassing market consensus. This was due to steady smartphone sales from North American clients and favorable profitability in the substrate division.

The earnings surprise is expected to continue in the second half of the year. Researcher Lee said, "LG Innotek will record strong earnings that significantly exceed market expectations in the second half due to strong sales of client new products. The stock price momentum is expected to be maximized in the fourth quarter when new products are scheduled to be launched."

Despite record-breaking earnings, the valuation remains at a historically undervalued level. Researcher Lee stated, "This undervaluation mainly stems from concerns about growth potential after 2022. While the core business maintains growth through expanded sensor-shift and 3D sensing adoption and favorable substrate conditions, the North American client is also preparing to launch XR devices that combine VR (Virtual Reality) and AR (Augmented Reality), positioning LG Innotek as a leading beneficiary in the global metaverse market going forward."