[Click e-Stock] "LG Innotek Begins ABF Expansion Cycle... Target Price Up"

Meritz: "Target Price Raised from 1.3 Million to 1.4 Million Won"

On June 11, Meritz Securities raised its target price for LG Innotek from 1.3 million won to 1.4 million won and maintained its "Buy" investment opinion.

Seungsoo Yang, a researcher at Meritz Securities, stated, "Reflecting expectations for relatively steep growth in ABF substrate sales due to the company's proactive entry into the ABF expansion cycle, we have applied a reduced discount rate of 10%, down from the previous 20%."

Previously, on June 4, LG Innotek formalized its entry into the semiconductor substrate expansion cycle by signing a memorandum of understanding with the city of Hai Phong, Vietnam, for investment in expanding its semiconductor substrate plant. This move is a proactive investment decision to respond to mid- to long-term customer demand. After the completion of the plant next year, LG Innotek plans to secure capabilities for ABF, FC-CSP, and RF-SiP semiconductor substrates in Vietnam by bringing in additional equipment.

Researcher Yang estimated, "LG Innotek's ABF substrate sales are expected to increase from 4.5 billion won last year to 12.5 billion won this year, and to over 40 billion won next year," adding, "The company is entering a full-fledged high-growth phase."

He further commented, "Although LG Innotek is a latecomer in the ABF substrate market, it has secured a number of new customers based on its ability to realize fine circuits, lamination, and quality stabilization technologies that it already possesses, as well as favorable industry shortages. Given that LG Innotek is proactively expanding capacity ahead of a mid- to long-term ABF upcycle, the gap with Tier-1 companies is expected to narrow rapidly."

For the second quarter of this year, the expected operating profit is projected to be 180.4 billion won, a 1,483.3% increase from the same period last year, exceeding the market consensus of 144.3 billion won. Researcher Yang noted, "Thanks to favorable exchange rates and strong mobile sales from North American clients, the optical solutions business is expected to outperform market expectations. For the package solutions segment, the full operation of the semiconductor substrate line continues, and the transfer of increased raw material costs to product prices is also being carried out sequentially."

This content was produced with the assistance of AI translation services.