[Click eStock] "LG Innotek Target Price 300,000 Won... 10% Downward Revision↓"

Daishin Securities has lowered the target price of LG Innotek by 10% to 300,000 KRW. The investment rating remains a buy.

Operating profit for the third quarter of 2024 is expected to be 261.7 billion KRW, below previous estimates and consensus. Revenue is projected to be 5.27 trillion KRW, in line with prior estimates and consensus.

Reflecting the estimated third-quarter performance, the earnings per share (EPS) for 2024 and 2025 have been revised down by 6.7% and 2.4%, respectively, compared to previous forecasts.

Camera module sales, including for the iPhone 16, are estimated to increase by 11.6% in the third quarter of 2024. While stable initial production is expected due to the application of Apple Intelligence (AI) in the iPhone 16 and inventory normalization effects in the distribution market, profit is anticipated to decline due to a sharp drop in the KRW-USD exchange rate, which is lower than the planned rate. The KRW-USD exchange rate fell to an average of 1,371 KRW in Q2 2024, 1,382 KRW in July, 1,351 KRW in August, and 1,338 KRW as of September 20.

Uncertainty regarding profitability estimates for the fourth quarter is expected to weigh on performance compared to the third quarter of 2024. Operating profit for Q4 is estimated at 462.5 billion KRW (consensus 495 billion KRW), but considering the KRW-USD exchange rate strengthening after the US interest rate cut and weaker sentiment around the iPhone 16 reservation and launch compared to the previous year, there is a possibility of further downward revisions in profits for both Q3 and Q4. Given the positive outlook for Apple Intelligence (AI), sales growth of the iPhone 16 is expected around the end of October when the Apple Intelligence service is launched, allowing assessment of replacement demand levels. Kangho Park, a researcher at Daishin Securities, analyzed, "In the short term, stock price volatility is high, but from a valuation perspective, it remains attractive."