[Click eStock] "LG Innotek, Apple AI Phone Launch Imminent... New Target Price Set at 360,000"

Apple's AI Smartphone Launch Scheduled for September
Maintaining Profitability in Electric Vehicle Components Business Despite EV Slowdown

Sangsangin Securities on the 23rd newly issued a 'Buy' investment opinion and a target price of 360,000 KRW for LG Innotek. The target price was calculated using the Price-to-Book ratio - Return on Equity (P/B-ROE) model. It is based on an expected Price-to-Book ratio (P/B) of 1.1 times for 2024 projected earnings.

Jung Min-gyu, a researcher at Sangsangin Securities, said, "There are two investment points: first, the shipment volume of the key North American customer is expected to increase year-on-year due to the launch of a new AI smartphone product, and second, despite concerns about a slowdown in electric vehicle demand, profitability is expected to be secured through the expansion of a high value-added product mix of core automotive components."

LG Innotek focuses on optical solutions, including camera modules for smartphones, as its main business. As of the first half of 2024, this accounts for 80.9% of sales. The company is continuously investing in substrate materials and automotive parts businesses such as semiconductor substrates, communication modules, and lighting modules to prepare future growth engines.

The first On-device Gen AI smartphone lineup from LG Innotek’s key North American customer, which accounts for 76.7% of LG Innotek’s first-half sales, is scheduled for release in September 2024. In this lineup, the number of models applying folded zoom camera modules will increase to two, and both sales volume and price are expected to rise simultaneously due to an increase in average pixel count leading to higher ASP. However, as some Gen AI features are delayed until the first half of 2025, the customer’s annual smartphone shipment growth forecast has been slightly revised downward.

Researcher Jung said, "Despite concerns about a slowdown in electric vehicle demand, the profitability of the automotive parts division is being maintained through the expansion of a high value-added product mix, and order backlogs are continuously increasing. LG Innotek is securing future growth engines by supplying autonomous driving solutions (automotive camera modules, communication modules, radar, lidar, etc.) in line with the mid- to long-term increase in electric vehicle demand and advancement of autonomous driving technology."