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Favorable price, volume, and cost dynamics expected in 2026

Lift TP by 14%

We raise our target price for LG Innotek by 14% to W250,000 (from W220,000).?We shifted the base year for our EV/EBITDA valuation from 2025 to 2026 and lifted our 2026 operating profit forecasts for each of the company’s business divisions.?In 2026, the iPhone Pro is expected to feature mechanical iris technology, which should drive ASP higher; in addition, the launch of foldables by LG Innotek’s key North American customer will likely fuel volume growth.

3Q25 preview:?Favorable FX helped sustain earnings

For 3Q25, we look for revenue of W4.8tr (-15% YoY) and operating profit of W182.7bn (+40% YoY), with the latter figure beating the consensus by 10%.?Despite tariff pressures and a lack of meaningful spec upgrades, pricing power on components for new device models and favorable FX helped support earnings. In particular, robust preorders for the North American customer’s new models likely kept 3Q25 earnings stable. In 4Q25, we expect seasonal volume growth and a stronger product mix to boost earnings further.

ASP, volume, and costs to improve simultaneously in 2026

We expect 2026 to mark the start of a structural turnaround, with simultaneous improvements in ASP, volumes, and costs (savings from expanded Vietnam production). Of note, the adoption of mechanical iris technology will raise barriers to entry, as it will require precision alignment of lenses and sensors as well as electrical/actuator design. As such, precision in module assembly and yield management will likely become key competitive advantages; consequently, we believe that LG Innotek will be able to expand its market share based on its technological leadership. Meanwhile, the share of Vietnam production (currently 30?40%) is likely to increase further (amplifying labor cost savings), and depreciation expenses should decline.

Sales momentum related to Apple should strengthen further, with 2H25 new model shipments likely to expand to 91mn units. The sales mix is favorable across both iPhone standard and Pro lineups, with the Air model receiving a particularly positive reception, thanks in large part to its differentiated form factor. In addition, the introduction of Apple Intelligence should spur replacement demand among iPhone 12?14 users. Against this backdrop, we anticipate that shipment growth is likely to continue into 1H26.