LG Innotek's shares closed Friday at ₩562,000. The 52-week low is ₩160,800 and the 52-week high is ₩1,530,000. In one year the stock went up roughly three and a half times, then gave back 63%.
Nothing in the accounts did that. LG Innotek Co., Ltd. (KRX:011070) builds the rear camera modules in Apple's iPhones and, in a much smaller division, the flip-chip ball grid array substrates that carry high-performance chips. Over the same twelve months the camera business went from awful to good, steadily, in a straight line. It never went up three and a half times and it never fell 63%.
What moved was a substrate the company has not yet mass-produced.
Start with the improvement, because it is real and large.
June-quarter operating income was ₩245.8 billion. A year earlier the same quarter produced ₩11.4 billion, and a net loss of ₩8.7 billion. That is a 2,057% increase on the operating line.
First-half revenue was ₩11,062.1 billion against ₩8,917.4 billion a year earlier, up 24%. That is a record half for the company. Over the last four reported quarters, operating income totals ₩1,069.6 billion, against ₩665.0 billion for full-year 2025.
Put that in ten-year context. Operating income fell four years running, from ₩1,271.8 billion in 2022 to ₩830.8 billion, then ₩706.0 billion, then ₩665.0 billion. The last twelve months broke the streak and did it decisively. On the numbers alone, this is the best the company has looked since the 2021 peak.
The shares are down 63% from their high while that happened.
In May the company showed a 120mm ultra-large FC-BGA at ECTC, the main US packaging conference, and said it was developing it with a North American big tech customer. Mass production is targeted for this year. Foreign buyers piled in. The stock had already roughly quadrupled by then.
That is the whole rally in one sentence. It priced a product line that has not yet shipped at scale, into a company where the camera division is the overwhelming majority of revenue.
The reverse arithmetic is worth doing. At ₩1,530,000, the same 23.7 million shares imply a market value near ₩36 trillion. Equity on the June balance sheet is ₩6,370.6 billion, so that price was about 5.7 times book. Friday's ₩13.3 trillion is roughly 2.1 times book and about 20 times the ₩663.1 billion of net income earned over the last four quarters.
Twenty times earnings for a business that just grew operating profit twentyfold in a quarter is not an obviously stretched number. Fifty-plus times was a different proposition, and it rested entirely on a substrate line with no disclosed revenue yet.
Something else is going on underneath. The stock touched ₩160,800 inside this same year, which on the same share count is under ₩4 trillion, or well below the equity on the books. The market has valued this company at less than its net assets and at nearly six times them within twelve months. That range is not a judgment about cameras. It is a judgment about whether LG Innotek is an assembler or a materials company, and the market has changed its mind twice.
Here is the near-term thing the valuation debate keeps skipping.
Inventories at June 30 were ₩2,486.0 billion. A year earlier they were ₩1,460.5 billion. That is a 70% increase, and it is the largest inventory position in the ten years of accounts on file.
Some of that is ordinary. LG Innotek builds ahead of every September iPhone launch, so the June and September quarters always carry stock. But the build this year is far bigger than last year's, and it is not matched by a 70% revenue increase. First-half revenue rose 24%.
The company is supplying the variable-aperture camera module for the iPhone 18 Pro, the first iPhone to use one. A new module with a new mechanism, built ahead of a launch, is exactly where an inventory number gets interesting. If the units sell, the build was correct and the December quarter is very large. If the mix skews away from Pro, the write-down shows up in the same line.
Cash flow already reflects the build. First-half operating cash flow was ₩398.0 billion against ₩878.8 billion a year earlier. The June quarter alone generated ₩97.9 billion of operating cash against ₩245.8 billion of operating income. Working capital took the rest.
This part gets almost no attention and it is the most durable change in the company.
Total liabilities were ₩6,489.7 billion at the end of 2023. At June 30, 2026 they were ₩5,552.2 billion. Equity went from ₩4,714.6 billion to ₩6,370.6 billion over the same period. The ratio of liabilities to equity fell from 1.38 to 0.87.
The mechanism was not a capital raise. Share capital has been ₩118.3 billion, unchanged, for eleven years. It was cash from operations plus a sharp stop in spending. Capex was ₩1,799.2 billion in 2023 and ₩611.0 billion in 2025. Property, plant and equipment shrank from ₩4,855.6 billion to ₩3,686.9 billion, because depreciation outran replacement.
Currency helped too. Comprehensive income has run well ahead of net income for several quarters, at ₩289.7 billion versus ₩169.7 billion in the June quarter. That gap is translation on the overseas plants, and it lands in equity.
The dividend went the other way. Payments were ₩98.2 billion in 2023, ₩61.8 billion in 2024 and ₩49.5 billion in 2025. Retained earnings now stand at ₩4,582.9 billion. A company halving its dividend while its balance sheet strengthens is signalling that it expects to need the money.
The bull case does not require the substrate business to be big yet. It requires it to be qualified. FC-BGA for AI accelerators is a small supplier list dominated by Japanese and Taiwanese incumbents, and a Korean entrant with a US design partner would be a genuine change in that market. If the 120mm part reaches volume with a named customer, the segment revenue can move faster than any camera line ever has.
There is also a customer-concentration argument that runs the other way from the usual one. Apple's supply chain pays badly but pays reliably, and it funds the substrate build. A company with ₩1,069.6 billion of trailing operating income and shrinking debt can afford to develop a new business without asking anyone for capital. Ecopro BM's rights offering this autumn is a useful contrast.
And the inventory build may simply be right. LG Innotek has visibility into Apple's build plans that outside investors do not. A 70% increase is what confidence looks like on a balance sheet.
The honest risk to all of it is that this remains a 4.4% margin business. Trailing revenue of ₩24,041.2 billion produced ₩1,069.6 billion of operating income. A recovery from a terrible base is not the same as structural improvement, and the substrate story has now been priced and unpriced once already.
The third-quarter report is the one that matters, and the line to read is substrate and material segment revenue, not the headline. If that segment is still small after a year of mass-production targets, the market was right to take the multiple back.
Two other numbers settle the near term. The September-quarter inventory figure will show whether the ₩2,486.0 billion build converted or accumulated. And December-quarter revenue, against the ₩7,609.8 billion of a year earlier, will show what the iPhone 18 Pro cycle is actually worth to this company.
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