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Off-peak season vs. long-term growth story

4Q23 review: Record-high results; off-peak season begins in 1Q24

For 4Q23, LG Innotek reported revenue of W7.6tr (+15.4% YoY) and operating profit of W483.6bn (+185% YoY). Revenue came in 5% above the consensus thanks to: 1) the effects of a North American customer’s new model launches; 2) ASP growth driven by improving specifications; and 3) favorable FX rates. Meanwhile, operating profit missed the consensus by 1.6%, hurt by: 1) one-time costs; and 2) weaker downstream demand in the automotive components unit.

Maintain Buy, but lower TP to W280,000

We lower our target price on LG Innotek to W280,000, as we revised down our operating value and net debt estimates to W8tr (from W9.6tr) and W1.35tr (from W1.4tr), respectively. For 2024, we slightly lowered our growth estimate for a key customer’s shipments to 2% (from 3%). We conservatively valued both the optical solutions business (due to intensifying competition among module suppliers and the aforementioned growth estimate revision) and the automotive components business (due to slowing end-market demand).