[Click eStock] "LG Innotek, This Year's Earnings Pattern 'Lower in the First Half, Higher in the Second'... Target Price Down"

Target Price Adjusted Down from 280,000 Won to 250,000 Won

On the 14th, KB Securities forecasted that LG Innotek would show a performance pattern of strong first half and weak second half this year, and lowered the target stock price from 280,000 KRW to 250,000 KRW. The investment opinion was maintained as 'Buy.'

Dongwon Kim, a researcher at KB Securities, explained, "The target price downgrade is due to the continued sluggish sales of the iPhone in China this year, which accounts for 80% of total sales, putting pressure on LG Innotek's weak second-quarter performance. Additionally, before the strategic customers launch new products in the second half, the increase in sales of competitors' artificial intelligence (AI) phones is leading to a decline in market share of strategic customers. The recent four-month low stock price trend of the North American strategic customer is also acting as a negative sentiment for LG Innotek's stock price."

However, there are also factors for performance improvement. Researcher Kim said, "Considering the new model launches in the second half, the increase in the number of high-end models will lead to a rise in average selling price (ASP), and seasonal demand growth will continue to contribute to performance improvement."

LG Innotek's first-quarter performance this year is expected to exceed market expectations. Researcher Kim stated, "First-quarter sales and operating profit are expected to increase by 3% year-on-year to 4.5 trillion KRW and 1.534 trillion KRW respectively, surpassing the consensus (average forecast by securities firms). This is due to the rise in optical solution ASP from the increased proportion of Pro Max sales and favorable KRW-USD exchange rates, which are positively impacting performance."

KB Securities estimated LG Innotek's annual performance this year to be 20.7 trillion KRW in sales, a 0.7% increase from the previous year, and 806.1 billion KRW in operating profit, a 3% decrease. Researcher Kim said, "The operating profit ratio for the first and second half of this year is expected to be 15% and 85%, respectively, similar to last year (20% in the first half and 80% in the second half). A clear performance pattern of strong first half and weak second half will appear due to the strategic customers' new model launches." He added, "Although LG Innotek's stock price, which has fallen 34% compared to early January last year, highlights price merit, considering the entry into the off-season, it will be influenced by the specifications, performance, and stock price trends of the North American strategic customer's new products for the time being."