[Asia Economy Reporter Hyungsoo Park] Newflex is showing strong performance. The outlook that its earnings will significantly improve from the second half of this year appears to have influenced the stock price.
As of 9:49 AM on the 9th, Newflex is trading at 3,550 KRW, up 12.34% from the previous day.
Researcher Kyunggeun Kang of NH Investment & Securities explained, "The competitive intensity is weakening due to the reduction in orders from Samsung Electro-Mechanics' camera FPCB and major competitors," adding, "Customer orders are expected to increase in the second half of the year."
He further added, "The restructuring effects from relocating the Vietnam factory and the strong sales of foldable phones will also contribute."
He estimated that Newflex will achieve sales of 97.1 billion KRW and operating profit of 4.6 billion KRW in the second half of this year. Compared to the same period last year, sales are expected to increase by 13.7%, and operating profit is expected to turn positive.
Researcher Kang also analyzed, "Sales to Oculus, the world's number one virtual reality (VR) device company, are expected to reach 26.4 billion KRW this year," noting, "This represents a 128.1% increase compared to last year."
He continued, "For the Oculus Quest 3, expected to be released next year, the number of PCBs per device is expected to increase from the current 4 to about 6," emphasizing, "Sales to Oculus are projected to rise to 40.4 billion KRW next year, a 53.0% increase from this year."
He explained, "Mass production of automotive FPCB began in July," adding, "FPCB, which has advantages in weight reduction and space-saving compared to traditional wire materials, is being installed in electric vehicle battery modules." He further stated, "It is planned to be supplied to OEMs such as Hyundai-Kia Motors, Volkswagen, Ford, and Xiaopeng both domestically and internationally," emphasizing, "Automotive FPCB is positive in terms of scale and profitability compared to camera module FPCB."
Due to portfolio diversification and structural improvements from restructuring effects, operating profit is expected to surge next year. Newflex is expected to achieve sales of 188.9 billion KRW and operating profit of 17.8 billion KRW next year, representing increases of 16.9% and 1693%, respectively, compared to this year. The supply-demand issues caused by convertible bond-to-stock conversions have been resolved, and based on next year's expected earnings, the price-to-earnings ratio (PER) is 5.5 times, indicating valuation attractiveness, according to Researcher Kang.
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