ResearchAlum "HCT Faces Overflow of 5G Test Certification Orders... Earnings Surprise Expected"

[Asia Economy Reporter Hyunseok Yoo] Research Alom analyzed on the 6th that HCT's performance is expected to improve due to the increase in equipment applying for 5G testing and certification. The appropriate target price was suggested at 15,600 KRW.

HCT is a testing, certification, and calibration company in the mobile communication and network sector. Researcher Seonghwan Choi of Research Alom stated, "Benefits are expected from the full-scale 5G investment this year," and evaluated, "Compared to 4G equipment, 5G equipment has more test items and the required period is up to 3 to 4 times longer, which is expected to positively impact operating performance."

He added, "The release of 5G smartphones and IoT products is expanding, and the more communication products are sold in the market, the more regular mandatory calibration demand is expected to grow accordingly," emphasizing, "We are in the process of securing testing and certification agency authority in 5G commercial countries, having acquired designated testing lab approval from Vodafone Group in Europe last year."

In particular, the expansion into business areas such as secondary batteries and aviation is also expected to have a positive impact. He explained, "We are focusing on new growth engines such as secondary batteries and aviation sectors, introducing testing and certification facilities for medium and large batteries, and have also signed a contract to handle calibration services for Lockheed Martin in the United States."

He added, "It is understood that the expansion of testing and certification subjects in the medical device sector is also being prepared for the second half of the year," and said, "Although sales from other front markets are still minimal, their high profit margins are expected to rapidly emerge as new growth engines."

He expected a significant improvement in this year's performance as well. He analyzed, "HCT's sales and operating profit this year are expected to increase by 35.3% and 36.3% from the previous year to 61 billion KRW and 10.7 billion KRW, respectively," and added, "With the expansion of 5G investments in major advanced countries including South Korea, sales in the testing and certification sector are expected to drive external growth, and stable growth in the calibration sector is anticipated due to the spread of 5G-related smartphones and IoT devices."