[Click eStock] "Haesung DS, Record High Q3 Performance... Overflowing Valuation Appeal"

[Asia Economy Reporter Ji-hwan Park] Eugene Investment & Securities evaluated Haesung DS as having achieved an earnings surprise and recorded its highest-ever performance, maintaining a buy rating and a target price of 55,000 KRW on the 19th, citing its valuation appeal.

Jong-sun Park, a researcher at Eugene Investment & Securities, stated, "In the third quarter, sales reached 170.4 billion KRW and operating profit was 28 billion KRW, representing increases of 43.2% and 124.9% respectively compared to the same period last year, achieving the highest quarterly performance." He analyzed that operating profit increased by 21.8%, significantly improving profitability beyond expectations, resulting in an earnings surprise.

Positive aspects of the third-quarter results include continuous record-high sales from the first quarter, and the lead frame business and packaging substrate business both grew by 44.9% and 39.9% respectively compared to the same period last year, maintaining strong growth following the previous quarter. In particular, automotive semiconductors saw a 31.5% increase in sales of automotive electronic components compared to the same period last year, driven by increased demand in the upstream market. The lead frame segment in the IT division also grew by 59.5%, leading the growth. Researcher Jong-sun Park commented, "The operating profit margin rose by 6.0 percentage points year-on-year, indicating a rapid improvement in profitability compared to the same period last year, which is positive," adding, "Profitability is rapidly improving due to quick price pass-through of soaring raw material costs (copper) and price increases caused by semiconductor supply shortages."

Fourth-quarter expected results on a consolidated basis are projected at 172.6 billion KRW in sales and 28.1 billion KRW in operating profit, representing increases of 52.0% and 362.3% respectively compared to the same period last year. It is forecasted that the company will set a new record high in sales due to continued growth in demand for automotive semiconductors and sustained growth in packaging substrates.

Researcher Jong-sun Park evaluated, "The current stock price is trading at a 2021 expected price-to-earnings ratio (PER) of 11.2 times, which is significantly undervalued compared to the average PER of 20.3 times for domestic and international peers and major customers such as Symtek."