[Click eStock] "LG Innotek, Earnings Surprise Expected Despite Q1 Off-Season"

[Asia Economy Reporter Kwon Jae-hee] KB Securities maintained its 'Buy' rating on LG Innotek on the 16th and set a target price of 500,000 KRW.

This is because LG Innotek's first-quarter earnings are expected to deliver an earnings surprise, exceeding market expectations by about 15% despite the off-season.

The factors behind the earnings surprise include ▲ steady demand for the iPhone 13, which was released six months ago, with LG Innotek's camera module supply share on an upward trend, ▲ the full-scale production of the iPhone SE starting in March, rapidly increasing the operating rate of the camera module production line, and ▲ the expansion of 5G smartphones driving increased demand for substrates, with LG Innotek, ranked first globally in system-in-package and antenna-in-package market share, expected to see semiconductor substrate sales in the first quarter rise by about 30% year-on-year.

Accordingly, KB Securities raised LG Innotek's first-quarter operating profit forecast by 8% to 363.3 billion KRW. This represents a 5% increase compared to the previous year and exceeds the market consensus of 316.4 billion KRW by about 15%, marking the highest first-quarter performance ever. This is because, despite the temporary shutdown of Foxconn's factory in Shenzhen, China due to COVID-19, iPhone production in March was relocated to other factories, so LG Innotek is not expected to see a decrease in order volume amid strong demand for the iPhone 13 and iPhone SE.

Researcher Kim Dong-won of KB Securities analyzed, "LG Innotek is expected to secure high earnings visibility with structural profit growth ahead," adding, "With price increases and expanded shipments of autonomous vehicles, the contribution of automotive components to profits will increase, leading to a record operating profit of 1.4558 trillion KRW in 2022, a 15% increase from the previous year, and it is expected to exceed 2 trillion KRW by 2025."