[Click e-Stock] "LG Innotek Enters Upward Share Price Phase...Target Price Raised"

Samsung Securities Raises LG Innotek Target Price to 800,000 Won

On July 28, Samsung Securities announced that LG Innotek's share price has entered an upward phase, driven by securing the substrate business, and raised its target price from the previous 650,000 won to 800,000 won while maintaining a 'Buy' investment rating.

Samsung Securities analyzed that LG Innotek has moved beyond a period of excessive share price volatility and has now entered a gradual upward phase. Samsung Securities analyst Lee Jongwook commented, "Securing the substrate business is likely to not only bring profit growth but also resolve valuation discount issues. This is primarily because the company had faced chronic discounts due to a single-customer, single-component structure, with optical solutions accounting for more than 80% of its revenue."

He added, "The flip-chip ball grid array (FC-BGA) business has reduced the risk of the initial ramp-up (mass production scale-up) by securing long-term supply agreements (LTAs) with clients, advance payments, and support for facility investment. Based on the increase in substrate capital expenditures (CAPEX), we are applying a valuation premium to the price-to-book ratio (P/B) multiple and raising the target price."

In the second quarter, LG Innotek posted strong results with revenue reaching 5.5272 trillion won (up 41% year-on-year) and operating profit rising to 245.8 billion won (up 2,057%). For the first half of the year, revenue amounted to 11.1 trillion won, breaking the 10 trillion won mark for the first time for the first half. The strong performance is attributed to: ▲ higher-than-expected revenue from optical solutions due to increased market share of client smartphones and expanded production of legacy models, ▲ solid results from the substrate business, and ▲ favorable foreign exchange effects.

Samsung Securities estimated that LG Innotek's substrate business division operating profit would reach approximately 60 billion won, a 140% increase from the previous year. Analyst Lee stated, "We are seeing simultaneous growth in prices and shipment volumes, as well as sales and margins for FC-BGA and flip-chip chip scale packages (FC-CSP). While FC-BGA remains in the red, we expect rapid growth, with revenue likely to reach the 400 billion won level by 2027 and an earlier turnaround to profitability possible."

Notably, Samsung Securities forecast that the Vietnam substrate plant would generate revenue of 1 trillion won annually starting in 2028. The report also projected that, centered on the substrate business, LG Innotek's CAPEX would rise from 1.8 trillion won this year to 2.5 trillion won next year.

It is also positive that client Apple is signaling the introduction of new lineups, including foldable models. Analyst Lee explained, "In the second half, LG Innotek’s high market share model—the Pro model—will lead releases, while during the off-season in the first half, it will secure utilization through the standard models, helping to mitigate seasonal profit volatility. The introduction of advanced technologies, such as variable aperture and folded zoom teleconverters, is also expected to contribute to an increase in LG Innotek’s average selling price (ASP)."

Samsung Securities raised its estimated operating profit forecast for this year by 13% to 1.244 trillion won. This reflects the rising smartphone market share and strong demand for high-end models from client Apple, as well as the substrate division’s entry into the peak season.

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