[Click eStock] LG Innotek, Q2 Profit Expected... Target Price Up 5%

Kiwoom Securities Report

Kiwoom Securities maintained its buy rating on LG Innotek on the 2nd, expecting the company to sustain its profit trend in the second quarter, and raised the target price by 5% to 380,000 KRW.

The company is projected to record an operating profit of 22.4 billion KRW in the second quarter. This is supported by a more favorable exchange rate effect and cost reduction efforts than expected. Display product lines such as Tape Substrate and photomasks have also completed inventory adjustments and entered a recovery phase. Ji-san Kim, a researcher at Kiwoom Securities, explained, “As of last month, the cumulative sales volume of the iPhone decreased by 6% compared to the previous year, which is better than the market growth rate (-13%). Apple is increasing its market share in China and India.”

In the second half of the year, attention should be paid to the positive factors from the new iPhone and optical solutions. Operating profit for the third quarter is expected to be 347.2 billion KRW, down 22% year-on-year, while operating profit for the fourth quarter is estimated to grow by 189%.

For the iPhone 15 series, both the selling price and shipment volume of optical solutions are expected to improve compared to the previous model. In terms of selling price, a significant increase is anticipated due to the adoption of a folded zoom camera in the top-tier model, expansion of the 48-megapixel camera to all models, and changes in the front 3D module structure. The effect of actuator internalization is also expected.

Regarding shipment volume, it is expected to reach around 90 million units by the end of the year, a 10% increase compared to the previous model. A base effect from last year’s production disruptions is also anticipated. The Pro series is expected to attempt additional differentiation with features such as a titanium case and 3nm AP, in addition to the folded zoom camera, which is likely to lead to a sales volume advantage for the Pro series. Researcher Ji-san Kim said, “Although initial yield issues arise due to the introduction of new technologies, the company has always proactively responded and utilized these as opportunities to increase market share. Next year, the competitive tools for optical solutions are expected to become more favorable, and the number of models adopting the folded zoom camera is likely to expand.”

Semiconductor substrates are expected to rebound in the second half of the year, mainly in mobile substrates such as RF-SiP and AiP, supported by new model effects. From next year, new FC-BGA is expected to lead growth in the substrate business. Automotive components are performing well, focusing on autonomous driving and electric vehicle parts.