[Click eStock] "LG Innotek, Lower-than-Expected Performance Forecast for Second Half... Target Price Down"

Target Stock Price Downgraded from 380,000 Won to 280,000 Won

On the 7th, NH Investment & Securities downgraded the target price of LG Innotek from 380,000 KRW to 280,000 KRW, citing expectations that the company's second-half performance will fall short. The investment rating was maintained at 'Buy.'

Researcher Lee Gyu-ha of NH Investment & Securities explained, "We lowered the earnings estimates and target price considering the possibility of a slowdown in new product sales from North American clients. However, given the valuation has dropped to historically low levels and the potential for sales improvement in 2025, we maintain our investment rating."

The initial response to new products from North American smartphone companies has been weaker than expected. Lee said, "Although exact sales figures have not yet been compiled, sales of high-end lineup products are showing weakness. Considering this, we lowered the 2024 and 2025 smartphone sales forecasts for North American set manufacturers by 5.6% and 4.3%, respectively, and also revised LG Innotek's operating profit down by 24.3% and 24.8% for 2024 and 2025, respectively."

Full-scale sales expansion is expected to be possible next year. Lee forecasted, "AI-equipped features are expected to be introduced in English-speaking regions around the end of this month, so it is necessary to observe consumer reactions. However, due to limited functionality and language support, full-scale sales expansion will likely be possible in 2025."

LG Innotek's third-quarter performance this year is expected to fall short of market expectations. Lee said, "We anticipate LG Innotek's third-quarter operating profit to be around 235.6 billion KRW, below both our previous estimate and the consensus (average securities firm forecast), due to a decline in the KRW-USD exchange rate and slower-than-expected recovery in the substrate market." He added, "In the fourth quarter as well, sales weakness and reduced shipment volumes are likely to result in performance below market expectations, but since these concerns have already been priced in, the potential for further stock price decline is limited."