[Click eStock] "LG Innotek, Entering Profit Momentum Slowdown Phase... Target Price Down"

Target Price Revised Downward by 7.4% Compared to Previous Estimate

On the 26th, Daishin Securities downgraded the target price of LG Innotek from 270,000 KRW to 250,000 KRW, citing that the profit momentum has entered a slowdown phase. The investment rating was maintained at 'Buy.'

Park Kang-ho, a researcher at Daishin Securities, stated, "We have lowered the earnings per share (EPS) for 2024 and 2025 by 6.2% and 26.5%, respectively. Operating profit for the fourth quarter of this year is expected to be 285.5 billion KRW, falling short of the previous estimate (332 billion KRW) and consensus (336.5 billion KRW). Due to rising costs in optical solutions and sluggish sales in semiconductor substrates and automotive parts, the operating profit margin is estimated to decline by 0.7 percentage points from the previous forecast to 4.5%. The profit momentum has entered a slowdown phase due to reduced iPhone 16 production until the first half of 2025," he explained.

The fourth-quarter performance is estimated at 6.37 trillion KRW in sales, down 15.7% year-on-year, and operating profit of 285.5 billion KRW, down 41%. Researcher Park analyzed, "Overall sales are in line with expectations, but a slowdown in sales centered on semiconductor substrates and a decline in profitability are anticipated. Due to weakened smartphone demand and inventory adjustments by memory manufacturers, sales of Flip Chip Chip Scale Package (FC CSP) and System in Package (SIP) are expected to be lower than previous estimates. Sales of automotive parts are also expected to remain stagnant due to weakened demand in the automotive and display markets."

However, considering valuation attractiveness, it is an appropriate time for gradual overweighting. Researcher Park said, "The downward revision of the fourth-quarter 2024 earnings has already been reflected in the stock price. Considering the valuation appeal, rather than further price declines, it is a time for gradual overweighting focusing on the potential increase in LG Innotek's market share and sales from the iPhone SE4 (expected release around April) and iPhone 17 (expected release in September) in 2025."