[Click eStock] "Gyeyang Electric, Clear Signs of Earnings Recovery, Entering Undervalued Zone"

[Asia Economy Reporter Ji-hwan Park] Hanyang Securities evaluated on the 7th that Gyeyang Electric shows a clear recovery in performance and appears to have entered an undervalued stock price range.

Established in 1977, Gyeyang Electric is a company primarily engaged in the manufacturing and sales of automotive parts and industrial products. As of last year, the sales ratio was 66% and 34%, respectively. The automotive parts division manufactures and sells motors for vehicles, with major customers including global automakers such as Hyundai Kia Motors, GM, and Tesla. The main products are motors for power seats and brakes, accounting for 49% and 36% of sales within the automotive parts division, respectively. The industrial products division's main product groups are divided into power tools, industrial tools, and small engines.

Yongho Kim, a researcher at Hanyang Securities, stated, "With the recovery of performance in both business divisions, operating profit turned positive from the third quarter of last year, and the 12-month operating profit as of the second quarter of this year is expected to exceed 10 billion KRW."

In particular, there is an analysis that demand for electric vehicles and vehicle motors, which will have expanded convenience features, is expected to increase. Power seats, which were previously applied only to high-end specifications, are now being expanded to basic specifications, and a certain level of convenience and safety features are becoming standard even in lower trims of vehicles. Four power seat motors are installed per vehicle seat. In the case of vans, power seats are also being applied to the rear seats.

Researcher Kim said, "The increase in the number of power seat motors installed per vehicle directly benefits the company," and added, "Power seat motors are one of the main products, and it is also favorable that the company holds a 70% market share within Hyundai Kia Motors." The mid- to long-term outlook for vehicle motors is also positive. Electric vehicles have more internal volume compared to internal combustion engine vehicles, which leads to higher utilization of internal space, resulting in expanded convenience features and ultimately higher utilization of vehicle motors."

Due to the favorable conditions in upstream industries, an increase in tool sales and improved profitability are also expected. Industrial products are greatly affected by the construction market. Recently, due to the favorable construction market, industrial product sales have shown a recovery trend since the second quarter of last year. Sales of industrial products in the first quarter were 36.6 billion KRW, a 20.9% increase compared to the previous year.

In particular, an increase in sales volume of power tools, which have a high sales ratio, is expected. The domestic market share is 30.8% (ranked first) for corded tools and 11.2% for cordless tools. Researcher Kim emphasized, "The expansion of the cordless tool product lineup is underway, and considering that the company is the number one in the domestic corded tool market, it is expected that the market share of cordless tools will gradually increase as the product lineup expands," adding, "The increase in sales volume of cordless tools, which have slightly higher profit margins compared to corded tools, will contribute to improving the overall company profit margin."