[Click eStock] "Patron's Q2 Falls Short of Consensus... Q3 Shows Improvement"

[Asia Economy Reporter Oh Ju-yeon] Daishin Securities stated that although Patron posted results below market consensus in the second quarter of this year, it expects a strong performance in the third quarter, maintaining a 'Buy' investment rating and raising the target price by 13% to 13,500 KRW.

According to Daishin Securities on the 31st, Patron experienced a decline in sales of camera modules due to the impact of COVID-19 in the second quarter, which increased the burden of fixed costs. Operating profit on a separate basis was 5.44 billion KRW, but after reflecting a one-time cost of 5.1 billion KRW, it posted an operating loss of 1.57 billion KRW on a consolidated basis. This figure falls short of the previous estimate of 2.4 billion KRW and the market consensus of 900 million KRW.

However, it is forecasted that in the third quarter, sales will improve to 315.2 billion KRW and operating profit to 14.9 billion KRW. This is based on the analysis that both supply and prices of camera modules will increase simultaneously.

Researcher Park Kang-ho explained, "In the second half of this year, Samsung Electronics is expected to adopt a market share expansion strategy in the global smartphone market, and with the expansion of smartphone sales mainly in the budget segment, the multi-camera adoption (three cameras) is being promoted, which is expected to bring a positive spillover effect to mid-sized camera module suppliers among mobile phone parts companies."

Researcher Park added, "Considering the ongoing trade disputes between the U.S. and China and the intensifying conflicts between India and China, Samsung Electronics is expected to increase its market share in Asia and Latin America," and "The upward trend in average selling price (ASP) due to multi-camera adoption and enhanced zoom functions in 2021 is considered valid."

In the case of Patron, it is expected to grow in 2021, supported by Samsung Electronics' expansion of smartphone sales in the third quarter and entry as a camera module supplier for premium smartphones. Accordingly, operating profit in 2021 is expected to increase by 103% from this year's estimate of 38.9 billion KRW to 79 billion KRW, and sales are expected to rise by 17.4% to 1.2708 trillion KRW.