KB Securities said on the 28th that LG Innotek is expected to expand supplies of semiconductor substrates centered on Intel central processing unit (CPU) chipsets. It maintained its "Buy" investment opinion and raised its target price to 750,000 won from 350,000 won. The previous trading day's closing price of LG Innotek was 536,000 won.
Kim Dong-Won, head of research at KB Securities, said, "LG Innotek is expected to expand supplies of semiconductor substrates through Intel CPU chipsets to Amazon's low-Earth-orbit satellites and the Humanoid Robot of Boston Dynamics and Figure AI," and added, "As it has also begun actual development of a CPO (Co-Packaged Optics) substrate, a next-generation optical communication packaging technology, full-fledged commercialization is expected going forward, which will act as a factor for a mid- to long-term valuation (corporate value) re-rating."
LG Innotek's sales in the first quarter this year were 5.5 trillion won, with operating profit of 295.3 billion won. Sales rose 11.1% from a year earlier, and operating profit surged 136%, beating the market consensus of 219.0 billion won. Despite being the off-season, second-quarter operating profit is estimated at 125.1 billion won, up 998% from a year earlier, as mobile demand from a North American client has continued to exceed expectations.
Operating profit for LG Innotek this year and next is estimated at 1.1 trillion won and 1.3 trillion won, respectively. Operating profit for the package solution segment is expected at 235.3 billion won and 385.3 billion won, respectively. Although package solution sales account for only about 7%–8%, the substrate share of operating profit is projected to expand from 11% in 2024 to 19% in 2025, 21% this year, and 30% next year.
It also projected that, with expanded supply of semiconductor substrates, sales of high-value-added semiconductor substrates will increase more than tenfold in three years, from 40.0 billion won last year to about 400.0 billion won in 2028.
Kim said, "Given that the average price-earnings ratio (PER) for substrate companies in 2027 is 40 times, LG Innotek's appropriate market capitalization is expected to approach 20 trillion won," adding, "This means there is ample room for further gains compared with the current market capitalization of 12.6 trillion won."