LG Mobile SmartPhone Sales beat Forecast

South Korean electronics Major, LG Electronics reported solid 1Q13 results and raised 2013 smartphone guidance to 45m (from 35m at the beginning of the year) are positive signals supporting our thesis that LGE’s smartphone business is on the rebound.

LGE reported 10.3m smartphone shipment, slightly ahead of our 9.8m forecast, and confirmed that inventory remains lean. For 2Q13, we infer management is looking for ~20% qoq shipment growth (to 12m+), with handset OP potentially flat to up.

We expect LGE to generate shipment growth in 2Q, mostly through mass tier 3G (L-series) and LTE (F-series) smartphones, sidestepping direct competition with Samsung’s Galaxy S4. LG Management has indicated a solid pipeline of products through 2H13, with an anticipated Optimus G2 in 3Q followed by a product with flexible substrate in 4Q.

LG Smartphone shipment to surpass 10mn units in 1Q13

LGE’s smartphone shipments will grow strongly every quarter in 2013F, thanks to well-timed launches of its various smartphone series – Optimus G, F and L.

LG Optimus G-Series SmartPhones (USD 600)
Following Optimus G shipments of 1mn units in 4Q12, we expect strong shipment of the G series in 1Q13F. LGE will ship over 1mn units of ‘Optimus G’ in 1Q13F, supported by the launch of 3G-based Optimus G in Europe, and more than 0.3mn of ‘Optimus G Pro’, which launched in February 2013. The momentum in the G-series should continue in 2Q13F with the launch of Optimus G II.

LG F-series SmartPhone (USD 300)
F-series is the mass-tier LTE smartphone series, which LGE is targeting to launch in 2Q13. We think LGE will launch Optimus F in North America and Korea in 2Q13, aiming to gain mid- and low-end smartphone market share and support the company’s overall smartphone volume growth in 2013F.

LG L-Series SmartPhone ( USD300)
For the low-end smartphone market, LGE has launched its L-series, targeting low-end smartphone market share in Latin America and
other emerging markets.

LGE’s smartphone momentum will be highlighted more in 2H13F. Handset operating profit should contribute 46% of the overall operating profit in Q4 13.