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View of LG Innotek factory. (Photo=LG Innotek) |
[Alpha Biz= Reporter Kim Minyoung] KB Securities has projected that LG Innotek will experience significant earnings surprises starting in the second half of this year. They have upgraded their investment recommendation to "Buy" and raised the target price to 400,000 KRW, an increase of 8.1%.
In a report released on the 25th, KB Securities noted that the earnings surprise in Q2 was just the beginning. With the iPhone replacement cycle beginning, they expect LG Innotek to achieve record earnings in the second half of this year and next year.
LG Innotek's Q2 operating profit surged eightfold compared to the previous year, reaching 151.7 billion KRW, exceeding the market consensus of 105 billion KRW by 45%. For Q3, the estimated operating profit is expected to be 301.8 billion KRW, a 99% increase from the previous quarter and a 65% rise from the previous year. This growth is attributed to the expected 12% increase in iPhone 16 shipments to 90 million units compared to the previous year, with high-value camera module production for the iPhone 16 starting in Q3.
KB Securities adjusted LG Innotek’s target price upward due to the anticipated start of the iPhone replacement cycle with the launch of the iPhone 16 in the second half of the year. They also expect the profit margins of semiconductor substrates to recover to double digits due to increased global smartphone demand, and a turnaround in the automotive components business. Their estimates for net income attributable to shareholders for this year and next have been revised upward by 4.2% and 12.6%, respectively, to 837.6 billion KRW and 997.1 billion KRW.
KB Securities forecasts LG Innotek's operating profit for the second half of this year will reach 821 billion KRW, a 151% increase from the first half of the year and the highest in three years since the 764.5 billion KRW recorded in the second half of 2021. They anticipate LG Innotek's operating profit to reach a record high of 1.38 trillion KRW in 2025, marking the beginning of significant earnings surprises starting in the second half of this year.
AlphaBIZ Kim Minyoung(kimmy@alphabiz.co.kr)
