Mirae Asset Securities raised its target price for LG Innotek (KRX: 011070) from KRW 950,000 to KRW 1.1m on 7th October 2026, whilst reaffirming its buy recommendation. Based on the closing price of KRW 644,000 on 6th October, the implied upside stands at 70.8%.

The upgrade rests on two pillars: higher earnings estimates for LG Innotek's FC-BGA (flip-chip ball grid array) substrate business, and an expansion in the valuation multiples applied to its global peers in the same segment. Mirae Asset nonetheless maintained a 20% valuation discount to those peers, citing LG Innotek's limited track record in large-format substrate production.

A new growth engine

FC-BGA substrates have emerged as LG Innotek's most compelling medium-to-long-term growth story. The technology — a high-density packaging substrate used in advanced semiconductors — currently accounts for roughly 5% of the company's substrate division revenue in 2026. Mirae Asset expects that share to rise to 30% over the medium term. At present, most FC-BGA revenue derives from substrates for PC central processing units, but the addressable market is broadening rapidly to include data-centre network switches, server security chips, and automotive AI computing modules. Analysts expect AI-related applications eventually to account for more than half of FC-BGA sales.

Operating profit margin estimates for the substrate division have been revised upward by 2% for 2027 and 5% for 2028. Margins are forecast to improve steadily from 7% in 2025 to 11% in 2026 and 13% in 2027.

Supply constraints amplify the opportunity

A structural quirk of the AI substrate market reinforces the bullish case. As AI applications demand not only greater volumes but also larger and more complex substrates, effective production capacity per unit of installed equipment actually falls. Data from KPCA (Korea Printed Circuit Association), cited by Mirae Asset, illustrates the dynamic starkly: substrate dimensions are expected to grow from 85×85mm in 2025 to 100×100mm in 2026 and 120×150mm in 2027, whilst the number of units yielded per production panel drops from 30 to 20 and then to just 12. Measured by area, output is projected to be 2.49 times larger in 2027 than in 2025. Because supply is structurally unable to keep pace with demand, Mirae Asset anticipates that product-mix improvements will drive margins well beyond what simple utilisation gains would normally deliver.

Near-term pain

The short-term outlook is considerably less rosy. Mirae Asset projects third-quarter 2026 revenue of KRW 5.95tn, up 8% year-on-year, but operating profit of just KRW 97.3bn — a fall of 60% year-on-year and 68.9% below market consensus. Currency volatility is identified as the primary culprit; underlying shipment volumes and demand for initial production runs of new products are said to be broadly unchanged.

LG Innotek's core optical solutions division — which makes camera modules, predominantly for Apple's iPhone — has also provided some reassurance. Demand for the standard iPhone 17 model is holding up better than expected despite the absence of a new standard-model launch, though currency pressures are expected to drag the division's third-quarter operating profit down to KRW 19.8bn, a significant sequential decline.

Medium-term trajectory

Over a longer horizon, Mirae Asset's forecasts are more encouraging. Consolidated revenue is projected to reach KRW 24.53tn in 2026, KRW 25.04tn in 2027, and KRW 26.96tn in 2028. Operating profit is expected to grow from KRW 1.0tn in 2026 to KRW 1.3tn in 2027 and KRW 1.83tn in 2028, with operating margin rising progressively from 3.0% in 2025 to 6.8% by 2028. Earnings per share are forecast to grow by 84.5% in 2026 — an impressive figure in absolute terms, though it falls short of the broader market consensus growth rate of 280%.

Reasons for caution

Investors should weigh the limitations of any single broker's view. Mirae Asset's own 2026 operating profit estimate of KRW 1.0tn sits 15% below the street consensus of KRW 1.18tn, reflecting its conservative third-quarter assumptions. Currency swings and iPhone demand uncertainty remain the key variables for the second half. The timing of LG Innotek's entry into large-format FC-BGA production for server CPUs and AI accelerators — and its ability to secure acceptable manufacturing yields — will be equally critical to any medium-term rerating.

The share price itself warrants attention. LG Innotek's stock has surged more than 250% this year, from a 2026 low of KRW 183,600 to KRW 644,000, with a 12-month absolute return of 241.6%. After such a sharp re-rating, the bar for further near-term gains is considerably higher.