LG Innotek to post improved earnings in 3Q

[THE INVESTOR] LG Innotek, the components-making affiliate of South Korea’s LG Group, is likely to achieve improved earnings in the third quarter on brisk demand for dual cameras, a local securities firm said on Aug. 8.

“Dual cameras will contribute the most to earnings improvement in the third quarter,” said Lee Soon-hak, an analyst at Hanwha Investment & Securities. 

LG Innotek will start to supply dual cameras to major smartphone camera module clients in Northern America during the July-September period, the analyst said, adding that revenue from dual cameras will stand at 1.2 trillion won (US$1.07 billion) this year and 2 trillion won in 2017.

Operating margins of the company’s optical solutions business unit seem to get better when production yields for dual cameras stabilize, Lee said.

“The yield will recover to 4.2 percent next year, nearing to its heyday level in 2014 and 2015,” he said.

A further boost in sales is expected as it could expand component supply to Chinese clients and cut costs by starting to run a new camera module plant in Vietnam. In July, the company said it will invest some US$230 million to build a production line in Haiphong in response to demand from clients like LG Electronics and Apple.

Hanwha Investment & Securities retained a buy rating on the stock and a target price of 115,000 won.

By Park Han-na (hnpark@heraldcorp.com)