[Click eStock] "LG Innotek, Peak Season Performance Even in Off-Season... Operating Profit Growth ↑"

[Asia Economy Reporter Kwon Jae-hee] DB Financial Investment maintained a 'Buy' rating on LG Innotek on the 28th, setting a target price of 450,000 KRW. This is despite the first quarter being an off-season, with performance comparable to the peak fourth quarter.

LG Innotek recorded sales of 3.9517 trillion KRW and an operating profit of 367.1 billion KRW in the first quarter. This represents increases of 28.7% and 5.8% respectively compared to the same period last year, meeting the continuously upwardly revised consensus.

Notably, the optical solutions division showed remarkable growth. First-quarter sales in the optical solutions segment surpassed 3 trillion KRW, exceeding those of the third quarter of last year, with strong profitability. Demand for flagship models from overseas strategic customers, launched in the second half of 2021, continued into the first quarter, resulting in solid performance. The substrate materials division, centered on semiconductor substrates, also maintained record-high margins.

Kwon Seong-ryul, a researcher at DB Financial Investment, stated, "The second quarter of this year is a transitional period moving into the second half, so performance will take a break, but an operating profit in the low 200 billion KRW range, which is the current consensus level, is achievable, continuing the year-on-year operating profit growth trend." He added, "In the second half, the average selling price (ASP) is expected to rise as the pixel count of camera modules for overseas strategic customers increases."

Furthermore, Researcher Kwon commented, "There is no significant problem with the current performance focused on optical solutions, but if we are to be ambitious, changes in the automotive parts business division seem necessary. The momentum of the automotive parts business division could justify an increase in valuation multiples." He evaluated, "The current stock price, below 10 times, is definitely cheap."