“They said it would hit 1.3 million won—now strip off a million, and it’s 370,000 won”...Brokerages still say to buy: “It could reach 500,000 won” [Shareholder Club]

[Financial News] LG Innotek reported third-quarter results that fell far short of market expectations. Revenue rose, but profitability deteriorated as the won-dollar exchange rate fell rapidly. Brokerages lowered their price targets but maintained Buy ratings, citing the growth potential of the semiconductor substrate business.
LG Innotek said on the 27th that its revenue for the third quarter of this year rose 18.6% from the same period last year to 6.3671 trillion won. Operating profit, however, fell 53.4% to 94.8 billion won, leaving the operating margin at just 1.5%. Net profit also declined 25.8% to 95.2 billion won.
As earnings expectations were lowered, price targets were also revised. Daishin Securities cut its 2026 and 2027 earnings-per-share (EPS) estimates by 9.2% and 28.2%, respectively, and lowered its target price by 23.9%, from 920,000 won to 700,000 won. DB Securities also cut its target from 950,000 won to 550,000 won. Hana Securities maintained its target price, which it had lowered from 1.3 million won to 530,000 won on the 22nd.
All three brokerages maintained their Buy ratings. LG Innotek shares closed at 374,500 won on the 27th, down 30% over the past month. Compared with the newly issued target prices of 530,000 to 700,000 won, the shares have upside potential of 41% to 87%.

Brokerages cited the exchange rate as the biggest reason for the weak results. In a report on the 28th, Daishin Securities noted that the average won-dollar exchange rate in the third quarter fell 6% from the second quarter and 13% from the end of June. Park Kang-ho, a researcher at Daishin Securities, said, “As the won-dollar exchange rate fell during the peak season, costs rose relatively sharply because of the gap in timing between raw-material inputs and revenue recognition.”
Jo Hyun-ji, a researcher at DB Securities, also said, “The main reason for weak profitability was the exchange rate’s decline during the quarter, rather than any damage to the fundamentals,” adding, “Because of the time lag between purchasing raw materials and selling finished products, the burden would have been greater than during a typical period of currency depreciation.”
The business itself remained solid. Revenue in the core Optical Solutions division rose more than 20% year over year to 5.4041 trillion won. The average selling price increased after a variable aperture was added to the camera module in a North American customer’s new smartphone, and orders to secure supplies of the new product in advance also contributed. However, as this division is the most exposed to exchange-rate movements, it took the biggest hit to profitability.
In the Mobility Solutions division, weak end-market demand and a sharp rise in the prices of raw materials such as E-glass and memory semiconductors pushed the operating margin down into the 0% range.

The outlook for the fourth quarter is also bleak. All three brokerages—Daishin Securities, Hana Securities and DB Securities—estimated fourth-quarter revenue at around 6.7 trillion won, 11% to 12% below the same period last year. Their operating-profit estimates were 196.6 billion won from Hana Securities, 198 billion won from Daishin Securities and 168 billion won from DB Securities—around half the 360 billion won consensus cited by DB Securities.
DB Securities said, “The volume of advance orders already reflected in the third quarter is likely to weigh on shipments in the following quarter,” adding, “This is also in line with Taiwan’s Largan, which is in the same supply chain, lowering its outlook for customer orders after September in mid-October.”
The division that brokerages all focused on was Package Solutions (substrates). Third-quarter revenue in Package Solutions rose 10.1% year over year to 481.8 billion won. Daishin Securities estimated that operating profit in the division increased by around 21%, driven by revenue growth centered on RF SiP and a larger share of high-value-added products. According to Hana Securities, tightening supply of BT substrates led to price increases of at least double digits for some products.
FC-BGA (Flip Chip Ball Grid Array) is seen as the next growth engine. Hana Securities expected server-grade FC-BGA mass production to begin in the fourth quarter and the company to receive advance payments from big-tech customers related to substrate capacity expansion. DB Securities projected that the business would begin to scale up in earnest from the second half of 2027, when both server-grade shipments and expanded capacity volumes are expected to be reflected.
Jo said, “As the Package Solutions division grows in prominence, its current valuation of 13 times earnings—close to the 10-times P/E once applied to legacy IT component stocks—could present a bargain-buying opportunity.” Kim Min-kyung, a researcher at Hana Securities, said, “A considerable part of the concerns has already been reflected in the share price,” and projected, “A reversal in the direction of the exchange rate, mobile demand proving more resilient than expected, and the addition of new FC-BGA customers are all likely to serve as catalysts for a share-price rise.”
[email protected] Kim Hee-sun Reporter