The author is an analyst at KB Securities. He can be reached at [email protected] — Ed.
BUY, target price 110,000 won
We maintain BUY on LGE, 12 million TP 110,000 won. We remain positive in 2023 due to lower logistics costs. Also, VS should continue its top-line growth (+31% in 2022 and +24% in 2023) thanks to a larger-than-expected order backlog (+). 38%) per year in 2022 during the growth of the EV market. H&A’s revenue should be boosted by rising ASPs with a growing share of premium electronics in shipments; High-end electronics are relatively less sensitive to economic fluctuations. Meanwhile, market conditions for the struggling HE and BS departments should decline to 22 in Q4.
1Q23E OP on KRW1tn; H&A will grow
We forecast 2Q22 consolidated revenue of 21.5t (+2%, +4% YoY) and OP of 324.0B Won (-57%, -57% YoY). Earnings must suffer HE/BS woes. On the other hand, VS should remain in the dark due to the increasing capacity utilization rate of automakers, which should generate revenue of 2.5tn won (+51% YoY). We see 1Q23 OP reaching 1 billion won, with H&A leading the way, and earnings improving across the board.
VS is expected to benefit from the expected Apple machine
We forecast 2023 revenue at 87.3tn (+5% YoY) and OP at 4.1tn (+9%) with improved earnings visibility. Since supplying IVI (in-car infotainment) for Mercedes-Benz’s EQS models, LGE has strengthened its partnership with lighting division ZKW and expanded its European customer base. LG-Magna e-Powertrain and LG Innotek are also building plants in Mexico to expand LGE’s North American customer base, and position LGE as a potential supplier of Apple Car components (expected in 2026).