[Click eStock] "LG Innotek, the Biggest Beneficiary Stock of AI iPhone"

KB Securities stated on the 31st that LG Innotek is the "biggest beneficiary of AI iPhone" and that "concerns about earnings have turned into expectations."

In a recent smartphone preference survey targeting Chinese consumers, the iPhone ranked first. For several months, the iPhone struggled due to Huawei and local Chinese smartphone marketing efforts and patriotic consumption, but recently, a significant change has been detected in iPhone sales in China. In China, iPhone sales decreased by 37% year-on-year in January and February, but increased by 12% and 52% year-on-year in March and April, respectively. This is because, in the Chinese smartphone market where the share of premium smartphone users is only about one-third, there is a clear trend toward preference for high-end brands, and the iPhone's price marketing is stimulating purchase demand.

iPhone sales in 2024 are expected to reach 235 million units, achieving the highest sales volume in three years since 2021. This is because the iPhone 16, scheduled to be unveiled in September this year, will feature AI functions that stimulate new demand, and there is an estimated waiting demand worldwide to replace 600 million iPhones. In particular, users of the iPhone 12 and iPhone 13, which recorded the highest sales in the past five years, are expected to start replacing their devices with the iPhone 16, increasing the likelihood of entering the iPhone replacement cycle starting this year.

Dongwon Kim, a researcher at KB Securities, said, "LG Innotek's earnings concerns at the beginning of the year are expected to turn into expectations." LG Innotek's second-quarter sales are expected to grow year-on-year and quarter-on-quarter despite the off-season, due to the price increase effect from expanded shipments of high value-added products, and operating profit in the second quarter is also expected to exceed consensus. This is because the substrate materials business, which accounts for 15% of total operating profit, is judged to have already confirmed the bottom of earnings due to the recovery of demand in the upstream industries (smartphones, displays). Furthermore, the momentum for LG Innotek's stock price rise includes Apple's AI technology and strategy disclosure at the Worldwide Developers Conference, China's shopping festival known as the second Guanggunje, and the unveiling of the AI iPhone 16. Therefore, LG Innotek, which simultaneously possesses both earnings and momentum, is considered the biggest beneficiary of the AI iPhone, with an iPhone sales ratio exceeding 80%. Researcher Kim said, "At this point, the upside risk of the stock price is rather judged to have increased."