[Click eStock] LG Innotek Undervalued... Expected to Achieve Record High Performance This Year

[Asia Economy Reporter Myung-Hwan Lee] Daishin Securities announced on the 15th that it expects LG Innotek to achieve record-high performance this year and maintains a buy rating with a target price of 450,000 KRW.

Daishin Securities forecasted that LG Innotek's consolidated operating profit for the first quarter of this year will be 350.8 billion KRW, a 1.1% increase compared to the same period last year. This is a strong performance exceeding the initial market estimate of 316.4 billion KRW. Sales during the same period are expected to reach 4.1 trillion KRW, a 32.3% increase year-on-year.

The strong sales of Apple’s iPhone 13, a major client, were analyzed as the driving force behind the strong performance. Despite being an off-season, the iPhone 13 showed solid sales, and the release of the budget model iPhone SE3 helped reduce fixed cost burdens. The product mix improved centered on cameras and semiconductor substrates for the iPhone 13, leading to an increase in average selling price and maintaining high profitability. The rise in the average USD-KRW exchange rate compared to last year was also noted as a positive factor.

Daishin Securities expects LG Innotek’s sales and operating profit to achieve record highs this year. The company’s total sales for this year are projected at 17.4 trillion KRW, with operating profit at 1.44 trillion KRW. These figures represent a 16.8% increase in sales and a 13.5% increase in operating profit compared to the previous year. It is estimated that the average selling price will rise due to an expected increase in pixel count for the premium models of the iPhone 14 series, scheduled for release in the second half of this year. For semiconductor substrates, LG Innotek, which holds the number one market share, is expected to benefit from increased demand for SiP (System in Package) and AiP (Antenna in Package) driven by the global smartphone market’s transition to 5G.

Researcher Kang-Ho Park of Daishin Securities stated, "Although LG Innotek’s stock price showed weakness due to increased economic uncertainties such as the Ukraine war, rising raw material prices, and the spread of COVID-19 in China, considering the upward revision of sales and profits in 2022, the valuation attractiveness is judged to have relatively increased."