Shares of LG Innotek (011070) plunged more than 10% in a short period amid concerns that Apple might raise iPhone prices, but securities analysts have instead raised their target price, viewing the drop as excessive relative to the company’s fundamentals. Following checks on the key component supply chain, analysts suggest there is no change to iPhone production plans for the second half of the year, and that the current dip represents a buying opportunity given the advancement of camera modules and growth in package substrates for artificial intelligence (AI) semiconductors.<\/p>\n
On the 6th, iM Securities maintained its ‘Buy’ rating on LG Innotek and raised its target price by 10%, from \u20a91 million to \u20a91.1 million (approximately $719.39). Based on the closing price of \u20a9872,000 on the 3rd, this implies an upside potential of 26.1%. LG Innotek’s stock price had fallen for three consecutive trading days since the 1st of this month, dropping over 10%, and is now down 51% from its peak.<\/p>\n
Ko Ui-young, an analyst at iM Securities, stated in a report, “LG Innotek’s stock price has fallen 51% from its peak, largely reversing expectations for high growth in package substrates.” Ko diagnosed that “recent price increases by Apple for MacBooks and iPads have fueled concerns about potential future iPhone price hikes, which exacerbated the stock’s decline.” Ko emphasized, “While this is an unfavorable issue for investment sentiment, we believe the fundamentals remain solid.”<\/p>\n
iM Securities predicted that even if iPhone prices were to increase, the magnitude would be limited. The reasoning is that since the iPhone accounts for roughly half of Apple’s total revenue and is the foundation for iOS-based service revenue, a sharp price increase that would damage shipment volumes is a difficult choice for the company to make. In fact, checks with multiple supply chain sources indicate that iPhone production plans for the second half of the year remain unchanged so far, and shipment volume forecasts through 2028 are also assessed to be on a solid trajectory.<\/p>\n
A key driver for earnings improvement is the variable aperture expected to be featured in new iPhones. The application of a variable aperture increases the complexity of the camera module assembly process, which is expected to expand LG Innotek’s added value and positively impact profitability. Accordingly, iM Securities forecasts that the operating profit margin for the Optical Solutions division will improve from a low of 2.6% last year to 4.4% this year and 4.5% next year.<\/p>\n
The growth potential of the package substrate business, driven by expanding investments in AI data centers, was also presented as a major investment point. The analysis suggests that rapidly increasing demand for FC-BGA (Flip Chip Ball Grid Array) substrates for AI accelerators, central processing units (CPUs), and switches is opening up business expansion opportunities for latecomer LG Innotek. iM Securities expects LG Innotek to invest more than \u20a92 trillion (approximately $1.3 billion) over the next two years to respond to this demand. The firm also forecasts that the Package Solutions division’s share of operating profit will expand from 19% last year to 39% by 2028.<\/p>\n
The second-quarter earnings outlook is also expected to surpass market expectations. iM Securities estimates LG Innotek’s second-quarter revenue at \u20a95.03 trillion (approximately $3.3 billion) and operating profit at \u20a9200.8 billion (approximately $131.3 million). This is 38% higher than its previous operating profit estimate and exceeds the market consensus by 26%. Analyst Ko said, “With the exchange rate remaining at a higher-than-expected level and iPhone demand still solid, the second-quarter earnings announcement is highly likely to serve as a catalyst for further upward revisions to earnings forecasts for the second half and beyond 2027.”<\/p>\n
iM Securities diagnosed that LG Innotek is currently trading below its fair value and offered the opinion that a buying-on-dips approach is valid. The analysis suggests that concerns over iPhone price increases are likely to be limited to a short-term contraction in investment sentiment, while actual fundamentals will continue to improve through camera module advancements and the expansion of the FC-BGA business.<\/p>\n","protected":false},"excerpt":{"rendered":"Shares of LG Innotek (011070) plunged more than 10% in a short period amid concerns that Apple might…\n","protected":false},"author":2,"featured_media":75924,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[25],"tags":[41171,3628,9211,38065,6255,41172,315,314,9450,30295,40971,19628],"class_list":["post-75923","post","type-post","status-publish","format-standard","has-post-thumbnail","category-lg","tag-41171","tag-apple","tag-fc-bga","tag-im-securities","tag-iphone","tag-ko-ui-young","tag-lg","tag-lg-group","tag-lg-innotek","tag-optical-solutions","tag-package-substrate","tag-variable-aperture"],"_links":{"self":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/posts\/75923","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/comments?post=75923"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/posts\/75923\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/media\/75924"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/media?parent=75923"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/categories?post=75923"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/tags?post=75923"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}