LG Innotek stock rating upgraded by JPMorgan on iPhone demand outlook

JPMorgan upgraded LG Innotek Co Ltd. from Neutral to Overweight, raising its price target to KRW230,000 from KRW170,000, citing expected strong earnings momentum. This upgrade is predicated on Apple's tax exemption on U.S. investment pledge and upward revisions to iPhone manufacturing builds, which are anticipated to create a positive environment for LG Innotek's financial results over the next 12 months, despite its recent underperformance against peers. JPMorgan also raised its FY25-27 EPS estimates by 6-9%, expecting strong end-demand and upcoming catalysts like the iPhone 17 launch to outweigh lingering tariff uncertainties for component vendors.

Analysis

JPMorgan has upgraded LG Innotek Co Ltd. to Overweight from Neutral, increasing its price target from KRW170,000 to KRW230,000 based on expectations of strong earnings momentum. The upgrade is directly linked to positive developments at a key customer, Apple, including a tax exemption on its U.S. investment and upward revisions to iPhone manufacturing builds, which are expected to bolster LG Innotek's financial results over the next year. This positive outlook exists despite the stock's recent relative underperformance, where it gained 14% over the last three months compared to a 20% rise for its peers. JPMorgan acknowledges the risk of tariff uncertainty for non-U.S. component suppliers but posits that strong end-demand will likely mitigate these concerns. Supporting this view, the firm has increased its FY25-27 earnings per share (EPS) estimates for LG Innotek by 6-9% and identified several near-term catalysts, including the iPhone 17 launch, positive sell-through momentum, and potential smartphone subsidies in China.

Key Decisions for Investors

• Given the stock's recent 14% rise underperforming the 20% gain of its peers, investors may view the JPMorgan upgrade and raised EPS estimates as a signal for a potential catch-up rally.
• The investment thesis is heavily dependent on Apple's performance; therefore, monitoring iPhone 17 launch data, manufacturing build rates, and sell-through momentum is critical for validating the expected earnings growth.
• Investors should remain cautious of the tariff uncertainty for suppliers outside the U.S., as any adverse policy changes could undermine the positive demand outlook and impact margins.