North American Client to Post Record-high Sales in 2022
The author is an analyst of NH Investment & Securities. He can be reached at kyuha.lee@nhqv.com. -- Ed.
LGI’s North American client is likely to report record-high sales in 2022, and LGI’s market share within the client should continue to expand. Trading at historically low valuations, despite strong momentum from XR, etc, we recommend loading up on the shares.
North American client to post record-high sales in 2022
With its North American client predicted to post record-high sales in 2022, LG Innotek (LGI)’s earnings should also reach new highs, as its market share within the client continues to expand on a decline in trust in LGI’s competitors. In the mid/long term, we expect earnings momentum to continue to grow on the introduction of XR (extended reality), folded zoom camera lenses, and autonomous vehicles. Noting such positives and the fact that LGI is trading at historically low valuations, we recommend increasing exposure to the stock.
LGI’s North American client is predicted to book record-high sales in 2022, threatening to take the top spot in the market. The firm plans to release a new low-end 5G smartphone in March to compete with low-priced Android phones. Moreover, its new models to be released in 2H22 should experience strong demand thanks to a change in form factor and higher camera specifications.
Meanwhile, as its competitors are losing trust due to production disruptions and passive investment, LGI’s market share at the North American client is set to expand. We expect LGI to register record-high earnings in 2022 on the back of a booming downstream industry and rising market share. In detail, we forecast 1Q22 OP of W330.2bn (-4.8% y-y), exceeding market consensus.
Valuations at historical lows despite momentum from XR, folded zoom, and autonomous vehicles
In the mid/long term, momentum at the North American client should grow thanks to the introduction of XR, folded zoom camera lenses, and autonomous vehicles. In particular, its XR devices, which have recently been spotlighted, could be released as early as 2H22.
Despite this fact, LGI’s share price is still trading at the bottom end of its historical P/E band. As expectations for new smartphones and XR devices will likely rise as we move towards 2H22, we recommend increasing exposure to the firm during the current low season.