[Click eStock] "LG Innotek, 1Q Earnings Downgrade... iPhone 15 Momentum Remains"

Kiwoom Securities lowered its earnings forecast for LG Innotek for the first quarter of this year but maintained a buy rating and a target price of 400,000 KRW, stating that the shipment cycle for the iPhone 15 series is expected to begin from the end of the second quarter.

Kiwoom Securities revised LG Innotek's first-quarter operating profit estimate down from 208.8 billion KRW to 162.2 billion KRW. Ji-san Kim, a researcher at Kiwoom Securities, explained, "The operating environment for optical solutions and semiconductor substrates is more challenging than expected," adding, "However, a trading strategy focused on the shipment cycle of optical solutions for the iPhone 15 series remains valid, and it seems highly likely that prices will rise significantly while shipments will be brought forward." He forecasted that the earnings pattern will show a larger amplitude with a low start and a strong finish compared to before.

Although production issues with the iPhone were resolved by the end of the year, deferred demand remains weaker than expected. iPhone sales in January were 20.87 million units, down 11% year-on-year. For semiconductor substrates, the industry as a whole is experiencing an increased decline in demand and price for memory substrates, while RF-SiP and AiP are also affected by weak iPhone demand.

Changes brought by the iPhone 15 series include price increases due to factors such as the adoption of a periscope zoom camera in the Pro Max model, the expansion of the 48-megapixel camera to all models, and changes in the specifications of the front 3D module.

In terms of shipment volume, there is a possibility that shipments will be advanced to prevent supply chain issues, and deferred demand from the iPhone 14 series may be reflected as potential demand for the iPhone 15 series. LG Innotek is expected to lead the supply of folded zoom modules and anticipates additional profitability improvements through the internalization of actuators.

Regarding semiconductor substrates, attention is focused on the possibility of early mass production of FC-BGA. The company plans to respond quickly to market demand, mainly for communication and home appliance products. The order momentum for automotive cameras remains strong, and business capabilities are being strengthened through the development of hybrid lenses for autonomous driving. The automotive parts division aims for new orders worth 3 trillion KRW this year, with the year-end order backlog expected to increase to 11.2 trillion KRW.