Spigen Korea, Expecting Dividend Increase Alongside Earnings Growth

[Asia Economy Reporter Oh Ju-yeon] Kiwoom Securities analyzed that Spigen Korea's current stock price is undervalued considering the performance improvement due to increased sales of mobile phone accessories this year and continuous dividend expansion.

On the 23rd, Kiwoom Securities forecasted that Spigen Korea's sales this year will increase by 13.2% year-on-year to 349.4 billion KRW, and operating profit will also rise by 13.2% to 49.9 billion KRW. Despite sluggish sales of Samsung and Huawei smartphones, external growth is expected to continue due to increased sales of Apple cases and mobile phone accessories following the launch of new iPhone models.

Researcher Park Jae-il of Kiwoom Securities explained, "Following the disposal of loss-making business units and withdrawal from the Chinese market at the end of 2019, no further decline in profit margins is expected this year, and continuous improvement in profit margins is anticipated going forward."

Spigen Korea operates in the sales of mobile phone accessories such as phone cases and protective films, utilizing Amazon as a major sales channel. The main product sold is mobile phone cases, and as of the end of 2019, the sales composition was 80% phone cases, 10% protective films, and 10% others. The major sales regions are North America and Europe, with sales composition as of the end of 2019 being 52% North America, 28% Europe, 10% domestic (Korea), and 10% others.

Researcher Park said, "The proportion of Apple-related sales within total sales was 45% in 2017, 47% in 2018, and 50% in 2019, indicating a high share, so Apple's new product launches are one of Spigen Korea's major growth momentum."

He added, "Apple launched the iPhone SE2, an entry-level model for the first time in four years, in about 40 countries including the US, Europe, and China in April this year, followed by a second launch in May in additional countries. It continues to sell out in the US, Europe, China, and Korea. Additionally, the flagship model iPhone 12 (the first 5G model) is scheduled to be released in the second half of the year, and since it is priced lower than existing flagship models, explosive demand is expected."

Accordingly, the investment opinion on Spigen Korea was set to 'Buy' with a target price of 70,000 KRW.

Researcher Park evaluated, "Considering continuous performance growth through product portfolio diversification and new country entries, operating profit margin improvement starting in 2020, approximately 200 billion KRW in cash, and continuous dividend expansion, the current stock price, with an expected price-to-earnings ratio (PER) of 7.1 times this year, is judged to be undervalued."