LG伊诺特（011070 KS）：买入：2025年第二季度预览-已计入和未计入价格的因素

EquitiesElectronic Equipment &Instruments Buy:2Q25 preview–what’s priced in and what’s not Korea ◆We see 2Q25 seasonal weakness amid unfavourable forexand unexciting iPhone momentum alreadybaked in the price MAINTAIN BUY TARGET PRICE(KRW)PREVIOUS TARGET(KRW)230,000230,000SHARE PRICE(KRW)UPSIDE/DOWNSIDE144,300+59.4%(as of13 Jun 2025) ◆Overshadowed catalysts: 1) market share regain;2) greaterimpact of costreductions;3) upside to auto parts margins ◆Maintain BuywithanunchangedTPofKRW230,000 What’s priced in:We think LGI’srecord-lowvaluation of 0.6x 12-month fwd PB(5.9xPE) has already captured potentialdownside risks:1)Intensifyingcompetition;2)sluggishiPhone demand,with delays in launching AIfeaturesweighingon LGI’s earnings andvaluation since 3Q24.3)PotentialUS tariffson iPhones assembled in Chinahavefurtherundermined investor sentiment onoveralliPhone supply chainssincethebeginning of theyear.Consensusestimatesarefactoringin4)muted near-term earnings on unfavourableforex;and5)limited camera spec upgrades intheiPhone 17 series. What’s not priced in:However,after a sharpcut to consensus estimates (down29%/18% for2025/26 OPyear-to-date), we see upside risks from:1)potential sharegain for LGI foriPhone cameras on continued US-China trade tension and anotherround of notable iPhone spec upgrades from 2026;2)greater impact of costreductionsfrom increasing optical component production in Vietnam and fallingdepreciation and amortization (D&A)costs;and3)potentialmargin expansion of autoparts givenrestructuringefforts on low-margin products andimproving mix withinthegrowing order backlog, especially for vehiclelightingand connectivity modules.Notably, we believe the potential introduction of variable aperture featuresand a slimform factor for iPhone cameras could have a positive impact on dollar content growthand market share for LGI in 2026.Oncost reduction, given that D&A expenseshavebegun to fall since 4Q24, we forecast annual D&A to drop by 9% in 2025,savingcKRW100bn,whichis equivalent to 0.3%pt upside to Optics OPM (3.4% in2024). Will Cho*Analyst, Korea EV Battery, Autos and TechnologyThe Hongkong and Shanghai Banking Corporation Limited,Seoul Securities Branchwill.cho@kr.hsbc.com+82 2 3706 8765 Weaker2Q25eonunfavourableforex:We forecast 2Q25 OP at KRW46bn(down69% y-o-y and 63% q-o-q), which is29%belowconsensus (45% lower than ourprevious estimate).Despitesolid growthin package substratesandauto parts, weexpectunfavourableforex (q-t-d average USD-KRW down 3.0% and current ratedown 5.7% vs. a 1Q24 average) and 1Q25pull-indemand for iPhones todriveweaker-than-consensus earnings in 2Q25. Hankil Chang*Associate, Korea Technology ResearchThe Hongkong and Shanghai Banking Corporation Limited,Seoul Securities Branchhan.kil.chang@kr.hsbc.com+822 3706 8750 Maintain Buy withPB-basedTP of KRW230k:We revise down our 2025/26 OPestimatesby6%/1%,reflectingtheweaker earnings outlook for 2Q25 and forexheadwinds; but this does notchange our PB-based TP of KRW230k.Despite ourearningsestimatecuts, westill expect OP to grow2%/30%in 2025/26(10%/20%above consensus)after two years of contractionon product mix improvement forcamera modules and margin recovery for substrates and auto parts.Afterthesharpcorrection (down15% for 6M vs. KOSPIup16%),we thinkinvestor focus shouldgradually shift to steeper growth in 2026 and AI-driven iPhone cycle. * Employed by a non-US affiliate of HSBC Securities (USA) Inc, and isnot registered/ qualified pursuant to FINRA regulations HSBC Global Research Podcasts| Listen to our insightsFind out more Issuer ofreport:The Hongkong and ShanghaiBanking Corporation Limited, Seoul SecuritiesBranch Disclosures & DisclaimerThis report must be read with the disclosures and the analyst certifications in the Disclosure appendix, and with the Disclaimer, which forms part of it. View HSBC Global Research at:https://www.research.hsbc.com Financials & valuation:LG Innotek Co Source: Bloombergconsensus Source:Bloomberg Source:Visible alphaconsensusestimates, HSBC Source: Company data Source:Bloomberg supply chain analysis Source: Company data, HSBC estimates Source: Company data, HSBCestimates Risks Valuation We maintain our Buyrating withan unchanged TP ofKRW230k:We revise down our 2025e/26e OP estimates by6%/1%, reflecting weaker earnings outlook for 2Q25e and forexheadwinds; but this does not change our PB-based TP ofKRW230k, as the incremental change to our 2025e BVPS ofKRW244,634(from KRW246,941) remains limited. Wecontinue to apply our unchanged target PB multiple of 0.92x(the previous trough valuation during 2016-20) to derive ourunchanged target price. Our TP implies upside of59%,and wemaintain our Buy rating. Downside risks ◆Weaker demand for high-end iPhone modelsresulting inalower adoption rate of triple cameras◆Intensifying competition in the iPhone cameramodule assembly business◆More severe yield issues related to new featureson iPhones◆Astrong KRWversus the USD eroding margin◆Larg