[Click eStock] Confirming Mando's Solid Profits, High Investment Appeal

[Asia Economy Reporter Lee Seon-ae] Ebest Investment & Securities announced on the 2nd that it maintains a buy rating and a target price of 98,000 KRW for Mando.

Researcher Woo-ung Yoo of Ebest Investment & Securities stated, "Across all ADAS/chassis sectors, it is expected that the advanced product mix will be maintained within HMG, a key client, for the time being. The market's evaluation of the ADAS business has recently shown a significant upward trend," adding, "After the spin-off, a detailed evaluation of the ADAS business will be possible. Considering the combined value with the existing Mando, the current stock price is judged to be sufficiently undervalued, and it is especially the most attractive investment among large parts manufacturers."

In the second quarter, sales and operating profit recorded 1.49 trillion KRW (YoY +46.8%) and 76.7 billion KRW (YoY turned positive), respectively, while net income attributable to controlling shareholders was 78.2 billion KRW (YoY turned positive). Compared to the previous quarter, the scale slightly shrank due to a decrease in production volume by automakers, but cost reduction effects from the Mando-Hella merger generated an increase in operating profit margin by about 40 basis points, raising the profit level. Although operating profit slightly missed our estimates, it exceeded the overall market consensus by approximately 6.7%.

With the spin-off scheduled for September 1, uncertainties regarding the growth potential of the existing chassis business are expected to be quickly resolved. Among the new orders worth 3.9 trillion KRW in the second quarter, 56% were for electric vehicle supply targets, which is a significant increase compared to the 18% proportion of total order backlog. In particular, sales to pure EV customers such as North American EV OEMs and China's NIO are expected to surge in the second half, and semiconductor supply disruptions for existing major North American customers like GM are anticipated to be resolved.