LG Innotek Co., an electronic device components making unit of South Korean conglomerate LG Group, is expected to report improved earnings in the second half of this year and onwards, thanks to a recovery in its camera module business and steady revenue growth from its vehicle component business.

In 2014, LG Innotek posted a record annual operating profit of 314 billion won ($276.3 million), up 130.5 percent from the previous year on sales of 6.47 trillion won, which was also up 4.1 percent on year. The company back then said it could achieve record earnings after it successfully solidified its leading position in the global camera module market that involves manufacturing camera components for mobile devices.

Camera module business is still one of the core areas leading LG Innotek’s growth. The business, however, has its ups and downs depending on how well certain finished products are sold in the market. Last year, LG Innotek that was considered the largest benefiter of the iPhone saw its overall earnings decline because of poor iPhone sales. In 2015, LG Innotek raised 223.7 billion won in operating income, down 28.8 percent from the previous year. Sales also slid 5.1 percent on-year to 6.14 trillion won.

Last year, Apple Inc. that suffered from poor sales of its newly released iPhone 6S and iPhone 6S Plus cut the iPhone 6 production by 30 percent from December last year, leading sales of LG Innotek, a supplier of the iPhone camera modules, to decline.

LG Innotek, however, is most likely to recover from last year’s stagnant earnings in the second half of 2016 thanks to Apple’s rosy sales outlook of its latest device. According to multiple industry sources, LG Innotek is expected to exclusively supply dual camera modules for Apple’s newest iPhone 7 that is slated to be released in mid-September.

According to Seoul-based KTB Investment & Securities Co., as the exclusive supplier of camera modules for Apple, LG Innotek is forecast to account for about 40 percent of North America’s camera module market this year, and even up to 67 percent in 2017. The brokerage house projected that the company’s profit margin should improve significantly following a rise in the cost of dual camera modules.

Sales from LG Innotek’s vehicle component business are also expected to steadily grow in the second half of this year, becoming one of the company’s new growth engines. Last year, LG Innotek raised 649.6 billion won in sales from its vehicle component business, up 22 percent from a year ago. In the first quarter of 2016, the company has won a 400 billion won worth of vehicle component supply deal.

LG Innotek has about 20 different vehicle component line-ups including motors that enhance vehicle safety and driver convenience, sensors, wireless communications modules, as well as battery management system (BMS) that controls the battery of electric vehicles from charging state to battery life. LG Innotek has been supplying BMS to General Motors Corp. since 2010.

Industry analysts also expect LG Innotek to reduce deficits in its light emitting diode (LED) business in the third quarter of this year, thanks to an increase in sales of high-power lighting solutions and curtailed depreciation expense.

Based on the outlook of many improved businesses, market observers forecast LG Innotek will swing to an operating profit in the July-September period from losses in the previous three months ending June. Despite the rosy outlook for the second half of the year, LG Innotek is projected to see an on-year decline in operating income and sales due to the slump in the first half of 2016.

According to brokerage consensus, however, LG Innotek is projected to raise 276.7 billion won in operating income next year, up a whopping 119.6 percent from this year. Net profit is also expected to jump 193.9 percent to 192.5 billion won during the cited period.

By Chae Jong-won

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]