LG Innotek Swings to Profit in First Quarter

By Kim Yoo-chul

Staff Reporter

LG Innotek, the component making affiliate of LG Electronics, said Monday its operating profit was 42.4 billion won for the first three months of the year thanks to the strong contribution of its light-emitting diode (LED) business.

Worries over its plan to issue new shares washed off. On Monday, shares of LG Innotek rose 9.62 percent to end at 159,500 won on the nation's main bourse, according to data from the Korea Exchange (KRX).

In a regulatory filing, Innotek said sales rose by 81.1 percent to 774.9 billion won from a year ago, while operating profit surged by 231.2 percent during the same period.

The operating profit of its LED business was a quarterly record of 155.1 billion won, it said. LG Innotek, which makes mobile phone components such as LCDs and camera modules, announced the result using the International Financial Reporting Standards (IFRS).

``Our display and network units have also helped strengthen our cash-balance sheets. We are positive over the bullish run in the current quarter,'' a company spokesman Jung Jae-wook said.

Jung said Innotek will invest more in LED-related businesses as a part of the corporate strategy to ride the ``LED wave,'' and added the official announcement will come out soon.

Such a stellar performance was widely expected. Innotek's Jung said it is receiving more calls from major TV set makers to supply its LED chips, and supply was tight.

The world's top two flat-screen TV makers ― Samsung Electronics and LG Electronics ― are massively boosting their sales of LED-backlit LCD TVs amid the global economic recovery. The prices of such television sets are falling due to higher competition between TV makers.

Despite the upbeat results and the positive market outlook, analysts are mixed over its share move.

``LG Innotek was one of the winners amid the rising demand for LED-backlit-embedded consumer products such as TVs and monitors. We revised up our target price for Innotek to 170,000 won from 150,000 won,'' Kwon Seong-ryol, an analyst at HanaDaetoo Securities said.

In contrast, Credit Suisse downgraded its rating for the company to ``underperform'' from ``neutral,'' and lowered its target price to 105,000 won from 140,000 won.

``While LG Innotek is planning to invest aggressively in the fast-growing LED business, we continue to believe it will be challenging for it to finance its aggressive LED spending only with EBITDA earnings and debt,'' the Swiss-based brokerage said.