On the 3rd, Korea Investment & Securities expressed optimism about LG Innotek, stating that the company has bottomed out due to easing risks in China and is expected to surpass an operating profit of 1 trillion KRW this year. The target stock price was maintained at 320,000 KRW, with a 'Buy' rating.
Researchers Park Sang-hyun and Lee Seung-yeon projected that "the estimated sales and operating profit for the second quarter will be 4.44 trillion KRW and 104.8 billion KRW, respectively, representing increases of 13.6% and 470.9% compared to the same period last year," adding that "sales are in line with consensus, while operating profit is expected to exceed consensus by 24.5%."
The two researchers explained, "We revised up the quarterly sales estimate by 1.9% and operating profit by 49.8% compared to previous estimates, mainly because the rebound of North American smartphone customers in the Chinese market is occurring faster than expected."
They further noted, "Following Apple's Worldwide Developers Conference (WWDC), expectations for Gen AI services in iPhones in the second half of the year have also increased," adding, "The bottom has been established. LG Innotek is expected to surpass an operating profit of 1 trillion KRW again this year, supported by the strong performance of North American customers."
They continued, "We consider the period of 2018-2019, just before the rebound in iPhone shipments in 2020, to be similar to the current situation," but added, "However, taking into account the strong external factor of the COVID-19 boom in 2020, we applied a 20% discount to the average price-to-book ratio (PBR) during that period, using 1.32 times as a reference for the target stock price calculation." The current PBR stands at around 1.1 times.
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