NH Investment & Securities said on the 27th that LG Innotek's package division is entering the section to benefit in earnest from artificial intelligence (AI), and growth is expected this year. It maintained its Buy recommendation and raised its target price to 380,000 won from 340,000 won. The previous trading day's closing price of LG Innotek was 303,000 won.
Hwang Ji-hyun, an analyst at NH Investment & Securities, said, "Starting in the second half of this year, cameras for humanoids will go into full mass production, and camera applications are expected to diversify," and "the operating profit contribution of the substrate division is expected to expand from the mid-20% range this year to 30% next year and the mid-30% range in 2028."
NH Investment & Securities analyzed that LG Innotek's main semiconductor substrate products have been produced at full capacity (maximum production capacity) since the end of last year and that an expansion is currently under review. Accordingly, it saw that server flip chip-ball grid array (FC-BGA) substrates will begin mass production in 2027, with full-fledged earnings contribution possible from 2028.
Hwang said, "Concerns about a slowdown in set demand due to the recent rise in memory prices have acted as downward pressure on the stock price," and "we judge that the expansion of investment in AI servers actually enlarges business opportunities for FC-BGA substrates, providing a structure that can offset a substantial portion of that risk."
LG Innotek's first-quarter revenue this year is projected at 5.4444 trillion won and operating profit at 200.7 billion won. Revenue is up 9.2% from a year earlier, and operating profit is up 60.2%. Operating profit is estimated to exceed the market consensus of 172.0 billion won.
On this, Hwang said, "We took into account that the exchange rate is staying at a higher level than our previous assumption and the strength of the substrate division," adding, "in particular, demand was found to be solid for package (RF-SiP) substrates, which are high-frequency systems, and for memory substrates."