[Click eStock] "LG Innotek, Strong Performance in Q2 and Q3"

KB Securities Report

[Asia Economy Reporter Minji Lee] KB Securities maintained a buy rating and a target price of 540,000 KRW for LG Innotek on the 24th.

According to display and module companies, the shipment volume of the iPhone 14, scheduled for release in September this year, is expected to increase by 20% compared to last year's iPhone 13.

The second-quarter earnings are expected to record an earnings surprise. Operating profit is forecasted at 271 billion KRW, a 35% upward revision from previous estimates. Despite the second quarter being LG Innotek's slowest season of the year, the reason for the expected record-high performance for the second quarter is that sales of the ultra-high-end iPhone 13 models are exceeding expectations due to the polarization of consumer spending patterns amid inflation.

Dongwon Kim, a researcher at KB Securities, said, "Among major IT companies, LG Innotek is the only one whose second-quarter earnings will significantly exceed consensus," adding, "In the inflationary expansion phase, sales of both ultra-high-end and ultra-low-end products are strong, and the sales of the ultra-high-end iPhone models (iPhone Pro, Pro Max) that LG Innotek focuses on are expected to continue to perform well."

LG Innotek is expected to see a significant improvement in performance starting from the third quarter due to the full-scale production of iPhone 14 components beginning in August. The shipment volume of the iPhone 14 is estimated to increase by 20% compared to last year's iPhone 13 (100 million units), raising the possibility of improved performance for LG Innotek in the second half of the year.

Researcher Kim said, "The shipment proportion of ultra-high-end iPhone models, which account for most of LG Innotek's camera module sales, is expected to exceed 60%," adding, "This is because the camera pixels are expected to improve fourfold compared to the previous model, leading to a 20% increase in unit price."