[Click eStock] "Jahwa Electronics, High Growth Expected in Sales and Operating Profit Next Year"

Daishin Securities Report

[Asia Economy Reporter Minji Lee] Daishin Securities maintained a buy rating and a target price of 33,000 KRW for Jahwa Electronics on the 17th. This is based on expectations that sales and operating profit will experience high growth starting next year due to securing new clients.

In the first quarter of this year, the company recorded sales of 77.6 billion KRW and operating profit of 3.8 billion KRW, down 17.7% and 30.3% respectively compared to the same period last year. The performance slowdown was due to a greater-than-expected decrease in supply of optical image stabilization (OIS) components to domestic clients and China, which increased the fixed cost burden overall.

The expected sales for the second quarter are 70.9 billion KRW, a 4.1% decrease from the same period last year, while operating profit is expected to turn positive at 3.2 billion KRW. This is due to a slowdown in OIS supply to domestic and overseas clients and an increase in low-margin product proportion, which is expected to worsen the product mix.

Jahwa Electronics plans to newly supply OIS to a North American smartphone company in the second half of 2023. On the 13th of last month, the company announced an investment of 191 billion KRW in the camera module parts business, which is expected to proceed in the second half of this year.

Annual sales for this year are estimated at 298.2 billion KRW and operating profit at 13.7 billion KRW, down 14% and 15% respectively compared to the same period last year. This is due to stagnation in the global smartphone market growth and expected intensified competition in the OIS sector. While growth in the mid-to-low price segment remains valid compared to premium, competition for market share among major clients is expected to increase due to lower-spec OIS and the emergence of new companies.

However, with the securing of new clients next year and OIS supply in the second half, annual sales are estimated to increase by 75.5% year-on-year to 523.4 billion KRW. New sales are expected to be 340 billion KRW. Researcher Kangho Park of Daishin Securities stated, “Overall operating profit is estimated to increase by 215% year-on-year to 43.2 billion KRW in 2023,” adding, “If OIS supply, economies of scale, and yield are secured based on a single model, the operating profit margin will be higher than the current level.”

Researcher Kangho Park explained, “The company will continue its growth strategy focused on increasing sales and operating profit in the second half of 2023,” and added, “It would be good to maintain a long-term strategy to expand its share.”