[Asia Economy Reporter Kwon Jae-hee] LG Innotek, considered a 'beneficiary stock' of Apple, is expected to post record-breaking earnings in the first quarter of this year, and analysis suggests that there is still momentum for the stock price to rise. Thanks to the anticipated effect of Apple's next-generation iPhone, its largest customer, and future momentum from automotive camera upgrades, the operating profit for this year is expected to approach 1 trillion won, with securities firms forecasting structural growth guaranteed over the next two years.
According to LG Innotek's earnings consensus compiled by financial information provider FnGuide on the 17th, LG Innotek's first-quarter sales are projected to reach 3.8244 trillion won, with operating profit of 326.3 billion won. Sales represent a 24.6% increase compared to the same period last year, marking the largest scale ever recorded in the first quarter. Although operating profit is down 5.9%, some securities firms believe it could surpass the operating profit recorded in the first quarter of last year. Hana Financial Investment raised LG Innotek's first-quarter operating profit forecast by 3% year-on-year to 358.5 billion won, and Hi Investment & Securities adjusted its forecast upward to 361 billion won.
This strong performance by LG Innotek is thanks to Apple, as a significant portion of LG Innotek's sales comes from Apple. According to LG Innotek's business and audit reports, sales generated from transactions with Apple amounted to 11.1924 trillion won last year. This represents a 73% increase compared to 6.4618 trillion won in 2020. The proportion of Apple in total sales also jumped from 68% in 2020 to 75% in 2021. In other words, three-quarters of total sales come from Apple.
LG Innotek's core business is camera modules for iPhones. It emerged as a major parts supplier when the iPhone X was equipped with a dual camera in 2017. The share of Apple in LG Innotek's sales was only 37% in 2016 but has surged every year since.
Especially this year, due to strong sales of the iPhone 13 and a favorable proportion of the Pro lineup from LG Innotek's perspective, record-breaking performance is expected. Apple’s global premium smartphone market share exceeding 60%, along with the launch of the iPhone SE targeting the mid-to-low-end market, also raises expectations for LG Innotek's performance. Although the volume of the next-generation iPhone is estimated to slightly decrease compared to existing models, the inclusion of a 48-megapixel camera is expected to increase the average selling price, with operating profit in the optical solutions segment anticipated to approach 1 trillion won.
Securities firms are also issuing positive outlooks for LG Innotek. IBK Investment & Securities raised its target price from 415,000 won to 520,000 won. Shinhan Financial Investment also increased its target price from 451,000 won to 480,000 won. Kim Un-ho, a researcher at IBK Investment & Securities, said, "We believe the stock price is still undervalued relative to earnings."
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