Lower LGI 3Q26 OP due to unfavorable F/X rates and weak optics solution; Remain Neutral

We lower our 3Q26 operating profit estimates for LG Innotek mainly to reflect the strong KRW versus USD and weaker optics solution estimates for the quarter. Although we recognize potential ASP upside from camera module spec upgrades in its major customer's latest smartphone series, we cut our optics solution estimates given the bifurcated model launches and customers' margin headwinds from rising memory costs that could lead to lower-than-expected shipments; we also believe customers may exert pricing pressure to counter elevated memory prices. Package solution estimates are reduced on near-term F/X headwinds, and we do not expect mass production at its new BT substrate facilities until 2028, with capacity constraints likely limiting revenue growth given production already runs close to full capacity, though mix improvement toward higher value-add applications supports continued growth. On the back of lower EPS estimates and refreshed target multiples, we cut our 12-month target price