[Click e-Stock] "LG Innotek Enters Performance Improvement Phase After 5 Years... Target Price Raised"

Target Price Raised by 13% from Previous Level

On October 15, KB Securities announced that it expects LG Innotek to enter a phase of performance improvement for the first time in five years, raising its target price from 230,000 won to 260,000 won. The investment rating was maintained at 'Buy.'

Kim Dongwon, a researcher at KB Securities, stated, "We are raising the target price for LG Innotek by 13% compared to the previous figure and presenting it as our top pick in the electrical and electronics sector." He explained, "This is because valuation gains are expected to materialize over the next five years due to a surge in shipments of humanoid robot cameras and autonomous driving vision solutions, as well as a surprise earnings result in the second half of the year driven by increased demand for new models from strategic clients. Additionally, in 2026, price hikes and volume growth for new camera modules with DSLR functions are expected, leading to upward revisions in consensus estimates. Accordingly, we have raised our operating profit forecasts for 2025 and 2026 by 8.1% and 12.4% to 660 billion won and 805.4 billion won, respectively." He added, "Next year, LG Innotek's performance is projected to mark a turnaround for the first time in five years since 2021, with revenue rising 10% year-on-year to 22.9 trillion won and operating profit increasing 22% to 805.4 billion won."

LG Innotek's third-quarter results this year are expected to deliver a surprise. Researcher Kim said, "Third-quarter results will likely show a 54% year-on-year increase in operating profit to 201.4 billion won, exceeding the consensus estimate of 168.3 billion won by 20%. This will be driven by higher utilization rates in optical solutions due to increased demand for new models from strategic clients and improved profitability in substrate materials."

Fourth-quarter results are also expected to surpass market expectations. Kim stated, "Fourth-quarter operating profit is expected to reach 322.1 billion won, a 30% year-on-year increase, as optical solution utilization rates approach their peak, exceeding market expectations. As a result, second-half operating profit is projected to rise 38% year-on-year to 523.5 billion won."

Supply of humanoid robot cameras in North America is also expected to expand. Recently, LG Innotek began exclusive supply of cameras for Figure 03, the humanoid robot from Figure AI in the United States, and next year's sales are expected to surge tenfold. The company is also simultaneously developing vision sensing modules for the next-generation Atlas humanoid robot from Boston Dynamics, which is expected to generate new sales in the future. Researcher Kim explained, "LG Innotek's physical AI (humanoid robots and autonomous vehicles) related sales are expected to grow at an average annual rate of 44%, increasing sixfold from 400 billion won in 2025 to 2.4 trillion won in 2030, reaching about 10% of total sales. In particular, as the technological power struggle and security issues between the United States and China are expected to lead to a restructuring of the global supply chain away from China-centric camera module companies, LG Innotek stands to benefit from this shift."

There are also expectations that LG Innotek will enter a phase of simultaneous expansion in both performance and valuation. Kim stated, "With its price-to-book ratio (PBR) at 0.7 times, LG Innotek is at the historical valuation floor. As performance improvement accelerates from the second half of this year, and as sales of physical AI products such as humanoid robot cameras and autonomous driving vision solutions increase, we expect a re-rating of the stock price and anticipate a phase of simultaneous expansion in both performance and valuation going forward."