"LG Innotek Heads to 2 Million Won": Operating Profit Seen Jumping 18-Fold in a Surprise Result... Korea Zinc's Target Price Cut Despite Record Earnings [Stocktopia]

[Financial News] Here is a roundup of major brokerage reports as of the morning of June 15.
LG Innotek is forecast to deliver a surprise result in the second quarter, the off-season, with operating profit expected to jump 18 times from a year earlier on strong semiconductor substrate and camera component sales.
Korea Zinc has seen its target price cut repeatedly despite a run of record-level earnings, as concerns over high interest rates and tightening weigh on valuations. Still, it retained its status as the top pick in the sector thanks to benefits from a strong won and its competitiveness in rare metals. Daeduck Electronics also had its target price raised sharply, with analysts saying it has laid the groundwork for medium- to long-term growth through price increases amid a semiconductor substrate shortage and a new 213 billion won plant expansion.
◆LG Innotek (011070)— KB Securities / Head of Research Kim Dong-won
- Target price: 2 million won (unchanged) | Previous close: 1,036,000 won
- Investment rating: Buy (unchanged)
KB Securities said LG Innotek is likely to post a surprise result that far exceeds market expectations in the second quarter, even during the seasonal off-season, and kept its Buy rating and 2 million won target price.
Kim Dong-won, head of research, said, "LG Innotek's operating profit in the second quarter will rise 18-fold from a year earlier to 202.8 billion won, despite the off-season," adding that "this would be an earnings surprise, beating the consensus estimate of 146 billion won by 39%."
The company is expected to see stronger medium- to long-term earnings visibility as its Optical and Package Solutions business, which accounts for 90% of total sales, continues to perform well. Higher shipments of semiconductor substrates have pushed factory utilization to around 100%, while camera module shipments are also running ahead of market expectations as Apple pursues a strategy to expand its iPhone market share.
Kim said, "Over the past 15 years, there has been only one case in which operating profit topped 200 billion won in the second quarter, the biggest off-season, and that was in 2022," adding that "this second-quarter result should be seen not as a simple one-off improvement, but as a meaningful sign of earnings recovery for the first time in four years."※ Optical and Package SolutionsOptical Solutions refers to the business that makes camera modules for smartphones, while Package Solution Division refers to the business that makes substrates connecting semiconductor chips to mainboards.
◆Korea Zinc (010130)— iM Securities / Analyst Kim Yoon-sang
- Target price: 1.7 million won (down 12.8%, from 1.95 million won) | Previous close: 1,201,000 won
- Investment rating: Buy (unchanged)
iM Securities lowered its target price for Korea Zinc to 1.7 million won, saying that although the company continues to post quarterly results at record highs, concerns over high interest rates and inflation are weighing on its valuation.
Analyst Kim Yoon-sang said, "This period, when inflation concerns triggered by supply shocks have raised the likelihood of tightening, is not broadly favorable for Korea Zinc's share price."
For materials companies like Korea Zinc, stronger growth in the economy can lift expected inflation or weaken the dollar, which in turn pushes up commodity prices, improves earnings, and leads to higher valuations.
Even so, Kim said, "Despite the unfavorable macro environment, supply disruptions and the spread of resource nationalism are expected to keep prices of major nonferrous metals such as zinc, lead, nickel, aluminum and rare metals firm, unlike steel," adding that "we are maintaining our top pick in the sector."
He also said that a 10 won rise in the exchange rate would boost Korea Zinc's operating profit by 15 billion won, noting that the recent sharp rise in the won-dollar rate is another positive factor.
◆Daeduck Electronics (353200)— Hana Securities / Analyst Min-kyung Kim
- Target price: 250,000 won (up 47.1%, from 170,000 won) | Previous close: 165,200 won
- Investment rating: Buy (unchanged)
Hana Securities raised its target price for Daeduck Electronics to 250,000 won, saying second-quarter earnings are likely to jump sharply as prices rise across all product lines amid a shortage of semiconductor substrates and the share of high-value-added products increases. Operating profit in the second quarter is forecast to reach 62.4 billion won, more than 30 times higher than a year earlier.
Analyst Min-kyung Kim said FCCSP is expected to see the largest price increase among Daeduck Electronics' core substrate products. He explained, "Flip Chip Chip Scale Package (FCCSP) is estimated to post the biggest price increase across all product lines, as mix improvement from higher specifications is reflected on the back of strong demand for automotive semiconductors used in radar sensors and Advanced Driver Assistance Systems (ADAS)."
He added, "Large-scale expansion secures medium- to long-term growth visibility, while advance payments from customers are also reducing downside risk," and said, "We believe there is still ample room for further profitability improvement through additional price increases and yield gains as supply shortages deepen." The analysis suggests the company has secured both a foundation for growth and a safety net through expansion and advance payments, beyond near-term earnings improvement.
Last month, Daeduck Electronics disclosed a 213 billion won facility investment. The new plant, consisting of one eight-story building, is expected to increase production capacity by about 80% from current levels. Operations are expected to begin gradually from the second half of 2027.※ Flip Chip Chip Scale Package (FCCSP)This refers to a semiconductor packaging technology that uses the Flip Chip method, in which bumps are formed on the chip surface and the chip is flipped and attached to the substrate when electrically connecting a semiconductor chip to a main substrate.※ Advanced Driver Assistance Systems (ADAS)This is a general term for safety and convenience technologies that help drivers. It includes lane departure warnings, automatic emergency braking and adaptive cruise control that maintains distance from the vehicle ahead, and is regarded as a stepping stone toward autonomous driving.※ Radar sensorThis component detects the distance and speed of nearby vehicles and objects using signals that bounce back after radio waves are emitted. It serves as the 'eyes' of autonomous vehicles and ADAS systems.

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