LG Innotek shares at new highs, tracking Apple's rise

Shares in LG Innotek Co., a major camera module supplier for Apple iPhones, climbed to a record high on Monday, in stark contrast to the flat wider market, following analysts' upward revisions to the South Korean company's earnings forecasts.

LG Innotek surged 6.02% to finish at 405,000 won ($333) on Monday, against a 0.77% dip in the benchmark Kospi index. The stock gained 24% this month, compared with the rangebound stock market.

Despite the bleak outlook for the economy in the wake of the Russia-Ukraine war, LG Innotek has outshined other technology stocks on expectations that its major client Apple Inc. will continue to fare well despite global supply chain bottlenecks. 

Foreign investors have been net buyers of LG Innotek for the seventh session in a row, taking a cue from a 9% advance in shares of Apple Inc. over the past week.

Innotek is the exclusive supplier of sensor-shift optical image stabilizers (OIS) for iPhones. 

KB Securities Co. revised its forecast for Innotek's first-quarter operating profit to 363.3 billion won from 335.8 billion won.

Since Foxconn suspended operations at its factory in Shenzhen, China last week on the back of the city's COVID-19-induced lockdown, Apple has relocated its iPhone production lines to other parts of China, said KB Securities analyst Kim Dong-won. 

Foxconn is a major contract manufacturer of iPhones.

"Demand for iPhone 13s and iPhone SEs remains strong ... the volume of orders for LG Innotek's camera modules will not be reduced," Kim said.

SEMICONDUCTOR SUBSTRATES, METAVERSE

Innotek is also enjoying a persistent shortage of semiconductor substrates as a producer of silicon wafers for mobile devices.

"The semiconductor substrate division is making a greater contribution to LG Innotek's earnings," said Hana Financial Investment analyst Kim Rok-ho.

"As a low-PER stock with high earnings visibility, it will remain on investors' buy list even in a volatile stock market."

KB Securities' Kim said that LG Innotek will be also categorized as a metaverse-themed stock from the second half of this year, when it is scheduled to supply three-dimensional sensing modules to augmented reality tool companies.

"From next year or 2024, it will also supply components to Apple Car and other autonomous driving cars and automotive parts will make a bigger contribution to its profits too," he added.

Write to Jae-Yeon Koh at yeon@hankyung.com
Yeonhee Kim edited this article.