[Click eStock] "LG Innotek Benefits from iPhone Big Cycle... Target Price Raised by 13%"

Strong iPhone 15 Sales Boost Q2 Operating Profit by 41%
Increased iPhone Replacement Demand Drives LG Innotek's Performance Improvement
Operating Profit Expected at 1.1 Trillion This Year, 1.25 Trillion Next Year

On the 11th, KB Securities analyzed that a big cycle for the iPhone has arrived for LG Innotek, and that the launch of the iPhone 16 will significantly improve its performance. They maintained a 'Buy' investment rating and raised the target price by 13.3% from the previous 300,000 KRW to 340,000 KRW. LG Innotek's closing price on the previous trading day was 243,000 KRW.

Dongwon Kim, a researcher at KB Securities, stated, "This target price increase reflects a 41% upward revision of the Q2 operating profit estimate due to strong sales of the iPhone 15, as well as the outlook for the launch of the iPhone 16 in the second half of 2024, which is expected to stimulate large-scale replacement demand." He added, "Accordingly, we have revised LG Innotek's operating profit for 2024 and 2025 upward by 18.1% and 23.9%, respectively, to 1.1 trillion KRW and 1.25 trillion KRW."

LG Innotek's Q2 sales are expected to reach 4.5 trillion KRW, thanks to strong iPhone 15 sales and the price increase effect from expanded shipments of high value-added products. This is projected to be a 4% increase from the previous quarter and a 16% increase year-over-year. It is expected to be the first time that sales growth is seen simultaneously compared to both the previous quarter and the same period last year. Additionally, first-half sales are forecasted to reach a record high of 8.8 trillion KRW. Q2 operating profit is estimated at 108.8 billion KRW, a 493% increase year-over-year, surpassing the consensus operating profit (77 billion KRW) by 41%, marking the highest performance since Q2 2022.

Researcher Kim said, "LG Innotek holds both performance improvement and new product launch momentum, so a significant performance improvement is expected with the launch of the iPhone 16 in the second half of the year." He added, "Operating profit in the second half is expected to increase about threefold to 821.4 billion KRW compared to 284.8 billion KRW in the first half." The iPhone 16, to be unveiled in the second half of this year, is expected to provide conversational AI services through an improved version of Siri similar to ChatGPT 4, and to apply OpenAI's API to Siri.

Therefore, 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 in the second half of this year, continuing large-scale replacement demand through the iPhone 17. The iPhone is expected to enter a big cycle. In particular, LG Innotek's iPhone sales (18.4 trillion KRW) account for 84% of total sales, so strong AI iPhone sales in the future are expected to directly lead to LG Innotek's performance improvement.