[Click eStock] Sekyung Hi-Tech, Attractive Exclusive Foldable Material Supplier 'Target Price Up'

[Asia Economy Reporter Lee Seon-ae] NH Investment & Securities upgraded its investment rating on Saekyung Hightech from neutral to buy on the 2nd and also raised the target price to 39,000 KRW (previously 19,000 KRW).

The reasons for the upgrade in investment rating and target price are: 1) the target price-to-earnings ratio (PER) was raised from 13.5 times to 17.5 times, 2) the valuation reference year was changed from 2021 to 2022, and 3) the assumption for 2022 customer foldable smartphone shipments was increased, resulting in a 27.2% upward revision of the 2022 operating profit.

Researcher Lee Gyu-ha of NH Investment & Securities explained, "The main reason for maintaining a neutral rating on the company until now was the low visibility of earnings since its listing. However, from the third quarter, driven by the expansion of foldable smartphone shipments, it is expected to enter a phase of solid profit recovery," adding, "The target PER was also set at the same level as peers, considering the growth potential and exclusive position in foldable smartphones."

In terms of performance, thanks to the increase in foldable smartphone volumes from customers in 2022, operating profit is expected to rapidly recover, reaching 32.3 billion KRW (+100.9% y-y, operating margin 9.6%), which is 27.2% higher than the previous estimate. Although the recent stock price has been favorable due to strong pre-orders for the Galaxy Z series, there is still room for further upside. The company’s strategy to focus on the foldable smartphone segment, which is the only hit product of its customers, is expected to become even stronger, and market entry by Chinese and North American companies is also anticipated to accelerate in the future.

Researcher Lee emphasized, "As a domestic display parts supplier, it is attractive that the company is expected to exclusively supply foldable smartphone parts not only to domestic smartphone companies but also to Chinese companies from the second half of the year, indicating high medium- to long-term growth potential."