Hyundai Motor Securities on the 10th maintained a "buy" rating and a target price of 1.45 million won on LG Innotek, saying the plan to expand its flip-chip ball grid array (FC-BGA) business is taking concrete shape.
Kim Jong-bae, an analyst at Hyundai Motor Securities, said in a report that "LG Innotek is among the companies expanding their business base the fastest amid a global FC-BGA supply shortage," adding, "Following its recent investment in Vietnam, there is a high likelihood of additional capital expenditures (capex) to respond to surging demand ahead."
Kim said LG Innotek is currently coordinating concrete supply and mass-production schedules with multiple global clients, and the related results are expected to be reflected in earnings sequentially starting next year. In particular, Kim noted that if it secures initial mass-production results (references), the pace of client expansion will likely accelerate further.
Kim analyzed, "Despite being a latecomer, the global supply-demand tightness is unlikely to ease easily because the supply chain for high-spec FC-BGA remains limited," adding, "Over the next four years, LG Innotek's FC-BGA revenue compound annual growth rate (CAGR) will reach 202%."
The flip-chip chip-scale package (FC-CSP) business was also assessed positively. Backed by rising demand for graphics DRAM (GDDR7) and the addition of new clients, it is building a memory and non-memory portfolio, and its current production capacity is said to be effectively near full capacity (full-capa).
The radio frequency system-in-package (RF-SiP) was also cited as a growth driver. Kim said, "RF-SiP is a packaging substrate business where LG Innotek's core competencies are concentrated," adding, "With the high entry barriers based on copper pillar technology intact, strong profitability and growth will continue."
The optical solutions division was highlighted for potential benefits from physical AI. Kim said, "LG Innotek is the company with the clearest direction within Korea's physical AI value chain," adding, "Cameras and sensors are among the most important components at the perception stage of physical AI."
Kim added, "It is about to begin supplying a top-tier global client," saying, "This will serve as proof that the optical solutions division is no longer a driver of a corporations value discount but a new growth engine."