[Click eStock] "PHA, Target Price Lowered to 14,000 Won"

[Asia Economy Reporter Park Soyeon] Hana Financial Investment on the 29th downgraded the target price of PHIA to 14,000 KRW while maintaining a buy rating.

PHIA's performance in the third quarter of this year fell short of market expectations due to the production impact on its clients. Sales amounted to 211.5 billion KRW, down 18% year-on-year, and it recorded an operating loss of 3.8 billion KRW, turning to a deficit.

Although sales increased at the Slovakian and Vietnamese subsidiaries, sales at the major subsidiaries in Korea, the United States, and China decreased by 12%, 34%, and 36%, respectively, due to the impact of the shortage of automotive semiconductors, resulting in a contraction in scale. Despite the reduced scale, profitability declined due to retroactive wage increases and rising export costs such as transportation expenses, leading to a 3.8 billion KRW operating loss. Despite the operating loss, pre-tax profit was 6.4 billion KRW, down about 7% year-on-year, due to a significant foreign exchange gain of 8.4 billion KRW.

PHIA has production subsidiaries in China, India, the United States, the Czech Republic, Slovakia, and Vietnam, in addition to Korea. Among these, the Vietnamese subsidiary mainly produces low-cost products under a low-cost structure and serves as a production base that exports back to Korea. Therefore, it is excluded from consolidated sales, but it has made a positive contribution in terms of profits, with cumulative third-quarter sales of 51.1 billion KRW and net profit of 5.1 billion KRW.

Researcher Song Seonjae of Hana Financial Investment said, "Steady growth is expected through the dual production system of the Korean and Vietnamese factories in the future." The three Chinese subsidiaries supply to Hyundai Motor, Kia, and local companies, but are currently recording cumulative losses due to production sluggishness at client companies. The U.S., Czech, and Slovakian subsidiaries were heavily affected by production disruptions at client companies due to the shortage of automotive semiconductors. However, with good local sales performance by clients and the easing of semiconductor supply imbalances, a simultaneous improvement is expected as production increases. The Indian subsidiary grew 18% cumulatively in the third quarter due to increased local production by Hyundai Motor and Kia, and further growth is expected in 2022. Researcher Song said, "Except for China, which has been sluggish for several years, production slowdowns at client companies are expected to recover in most regions," adding, "Additional growth contributions are expected from India, Vietnam, and others."