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Photo courtesy of LG Innotek |
[Alpha Biz= Kim Sangjin] Shinhan Investment announced on Tuesday that it has reduced LG Innotek's (011070) target price by 21%, from KRW 280,000 to KRW 220,000, citing lowered performance expectations for this year. However, the firm maintained its "Buy" rating.
The brokerage stated, "Operating profit for Q4 is expected to reach KRW 287.7 billion, a 41% year-on-year decline and 12% below the consensus estimate of KRW 328 billion. While favorable exchange rates (KRW 1,397/USD in Q4 2024 vs. KRW 1,321/USD in Q4 2023) are a positive factor, intensified competition to secure market share continues to weigh on results."
Shinhan Investment added, "Operating profit for 2025 is projected to decline by 6% year-on-year to KRW 700.8 billion, with our estimates revised downward by 25%." The firm's 2025 estimated earnings per share (EPS) were also reduced by 27%, from KRW 27,828 to KRW 20,161.
Despite these challenges, the brokerage identified two key growth drivers: "Even during a period of limited camera specification upgrades, expanding demand driven by broader AI application is expected to lead to increased shipment volumes." Shinhan Investment forecasts a 15–25% increase in the average shipment volume of flagship models (for China and other markets) in 2024, particularly for AI-enabled models.
Additionally, the brokerage highlighted the expansion of high-value business portfolios, such as automotive electronics and substrates, as a key factor for a potential valuation re-rating. "Despite the downward revision of the 2025 forecast, LG Innotek's valuation attractiveness remains positive. Attention should be paid to rising customer sales volumes amid lowered performance expectations," it emphasized.
AlphaBIZ Kim SangJin(letyou@alphabiz.co.kr)
