On the 28th, IBK Investment & Securities maintained its investment opinion on LG Innotek as 'Buy' but lowered the target price from 450,000 KRW to 370,000 KRW, citing weaker-than-expected first-quarter earnings.
LG Innotek's first-quarter sales for this year are estimated at 4.3876 trillion KRW, down 33% from the previous quarter. Sales are expected to decline across all business units except for the other electronic components division. In particular, sales of the optical solutions segment are anticipated to decrease the most significantly.
Operating profit for the first quarter is also expected to fall short of estimates, reaching 114.8 billion KRW, down 32.5% from the previous quarter. This is attributed to the poor performance of the optical solutions and substrate materials divisions.
However, performance is expected to improve in the second half of the year due to the effect of new products from overseas clients. The average selling price (ASP) of new models in the second half is expected to rise sharply, and the volume is also anticipated to increase compared to previous models.
Kim Unho, a researcher at IBK Investment & Securities, said, "Although the first half results are weak due to the poor performance of the optical solutions segment, relatively high growth can be expected in the second half, with quarterly performance improving from the second quarter as the bottom. Considering the low first-half and high second-half performance momentum, now is judged to be the right time to invest, and the stock price is undervalued relative to earnings."
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