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DB Financial Investment Raises LG Innotek Target Price
From 650,000 Won to 1,850,000 Won
On June 2, DB Financial Investment maintained its "Buy" investment opinion on LG Innotek and raised its target price from 650,000 won to 1,850,000 won.
Hyunji Cho, a researcher at DB Financial Investment, stated, "While the core optical solution business remains robust, the package solution division, despite being a latecomer, is rapidly narrowing the technology gap compared to expectations. As such, we believe this is the point at which the valuation gap with leading players can gradually be reduced."
Researcher Cho explained that even as a latecomer, LG Innotek has seen increased opportunities due to rising demand for flip-chip ball grid array (FCBGA) substrates. She said, "Despite being a late entrant, the company is quickly advancing its FCBGA technology based on its expertise in microcircuit implementation, stacking, and quality stabilization acquired from its semiconductor substrate business." Although its utilization rate is currently low, she added that LG Innotek has a high possibility of making preemptive capacity expansions as entry into large-area substrates for server-grade CPUs and similar applications is becoming increasingly visible for next year.
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The mainstay optical solution business also remains solid. Researcher Cho projected operating profit for the second quarter of this year at 145.4 billion won, representing a 1,176.8% increase compared to the same period last year. She explained that the cumulative sales volume from January to April this year for a North American client—presumed to be Apple—with a stable supply chain, was the only one to show year-on-year growth. With the company's competitive advantage expected to continue and the exchange rate remaining favorable, she noted that LG Innotek's sales outlook is also "bright."
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