[Click eStock] "Foldable Phone Strength Continues... KH Vatec January Expectations Rise"

Reduced Earnings Decline Even in Off-Season 4Q
Expectations Rise 6 Months Before Foldable New Product Launch

[Asia Economy Reporter Minwoo Lee] As the monthly shipment trend of foldable phones continues to show strong performance, positive prospects are emerging for KH Vatec, a related parts supplier. With the 4th generation foldable phone expected to be released around June to July next year, it is analyzed that related expectations could be reflected in the stock price starting from next month.

On the 27th, SK Securities maintained a 'Buy' rating for KH Vatec based on this background and raised the target price by 17.9% to 33,000 KRW. The closing price on the previous trading day was 24,000 KRW.

First, it forecasted sales of 112.2 billion KRW and operating profit of 10.5 billion KRW for the fourth quarter of this year. Compared to the same period last year, sales are expected to increase by 231.7%, and operating losses are expected to turn into profits. Although the fourth quarter is usually an off-season with significant inventory adjustments, it is expected that there will be no significant profit reduction this year. Researcher Dongju Lee of SK Securities explained, "With the foldable hinge sales ratio exceeding 70%, the monthly shipment trend of Samsung Electronics' Galaxy foldable phones remains strong," adding, "Shipments maintained 1.4 million units in both October and November, are estimated to exceed 1 million units this month, and the shipment volume is not expected to decline sharply in the first quarter of next year."

Expectations are projected to concentrate in January next year. Considering the stock price trends before and after the release of the 2nd and 3rd generation foldable phones, excluding the first foldable product Galaxy Fold 1, a low point is usually formed six months before the launch. Researcher Lee said, "With the 4th generation product release expected around June to July next year, related expectations could gradually be reflected in the stock price starting from January," and analyzed, "Market sentiment for smartphones has also been recovering since this month, which will further highlight interest in foldables."

Although the exclusive supply position of hinge parts may be challenged starting next year, it is not seen as a major issue. Researcher Lee emphasized, "Hinge-related sales are estimated to increase by more than 100 billion KRW compared to the previous year," adding, "Changes in form factors such as tablets and double folding could further enhance the added value of hinges in the future."