[Click eStock] "KH Vatec, Foldable Smartphone Shipments Increase... Target Price Up 12%"

NH Investment & Securities Report

[Asia Economy Reporter Minji Lee] NH Investment & Securities maintained its buy rating on KH Vatec on the 9th and raised the target price by 12% from the previous level to 37,000 KRW. This adjustment is due to the upward revision of the client company's foldable smartphone shipment forecast.

The current forecast for the client company's foldable smartphone shipments next year is expected to increase by about 11.5%, from the previous 15.7 million units to 17.5 million units. Operating profit and earnings per share are also estimated to have been revised upward by 11% and 11.3%, respectively, compared to previous estimates.

Researcher Kyuha Lee of NH Investment & Securities stated, "The recent issuance of exchangeable bonds worth 33.5 billion KRW, with treasury shares as the exchange target, reflects consideration of the expanding foldable smartphone market," adding, "Through this fundraising, KH Vatec's foldable smartphone hinge production capacity is expected to expand from the current monthly level of 1.5 to 2 million units to 2.5 million units in the future."

Although there are significant concerns that the exclusive supply structure of hinge components may be disrupted, it is judged that the possibility of other companies supplying these components as main vendors is low. The possibility of hinge dual sourcing is higher, and KH Vatec's expected market share next year is projected to be around 85-90%. Researcher Kyuha Lee analyzed, "Considering the unique technological competitiveness and mass production capability related to hinges, it is not easy to replace the main vendor," and added, "The issuance of these exchangeable bonds and the potential for facility expansion also support this."

Within the existing client company, it is also positive that benefits are expected not only from foldable smartphones but also from new IT device form factor changes such as foldable laptops and rollable smartphones. Additionally, sales diversification toward Chinese companies is anticipated, which could lead to further performance growth.