[Click eStock] "KMW, Q2 Earnings Expected Amid 5G Investment Expansion Direction"

Cape Investment & Securities Presents 'Buy' Investment Opinion and Target Price of 75,000 Won... Closing Price on 28th at 57,700 Won

[Asia Economy Reporter Kum Boryeong] As the direction of expanding investment in global 5th generation (5G) mobile communication services becomes clear, there is an analysis that KMw’s second-quarter performance is expected to improve.

According to Cape Investment & Securities on the 29th, KMw’s first-quarter performance recorded consolidated sales of 77.5 billion KRW and operating profit of 6.6 billion KRW, down 34.4% and 73.6% respectively compared to the previous year. Although the first quarter is traditionally an off-season, the impact of the novel coronavirus infection (COVID-19) was also added.

Kim Inpil, a researcher at Cape Investment & Securities, said, “While domestic telecom companies resumed projects and system sales increased by 24.5% compared to the same period last year, sales of antennas and filters decreased by 86.4% and 46.9% respectively due to the impact of COVID-19 in China, the United States, and Japan.” He explained, “The operating profit margin recorded 8.5%, down 12.5 percentage points from the same period last year. This was due to a deleveraging effect caused by the decrease in sales, and the increase in the sales proportion of systems, which have a relatively low operating profit margin in the product mix.”

Performance is expected to improve from the second quarter. Although 5G investments at home and abroad were somewhat delayed due to the impact of COVID-19, it is analyzed that the incentive for network investment remains high due to the surge in traffic. In particular, traffic overloads from YouTube, Netflix, and others support the necessity of network investment.

Researcher Kim said, “Second-quarter performance is expected to improve significantly compared to the previous quarter. The performance, which is expected to be reflected in earnest from the second quarter, includes the execution of 5G facility investment (CAPEX) by the three domestic telecom companies according to the domestic economic stimulus plan (a total of 4 trillion KRW to be executed in the first half), MBF sales to China’s ZTE, and 4G equipment sales to Japan’s Rakuten.” He added, “In addition, there is a constant possibility that the United States will also begin full-scale 5G infrastructure investment.”

Cape Investment & Securities gave a “Buy” investment opinion on KMw. The target stock price was raised from the previous 65,000 KRW to 75,000 KRW. The closing price on the 28th was 57,700 KRW.