[Click eStock] "Sollid, Operating Profit to Surge This Year... A Buying Opportunity at Low Prices"

[Asia Economy Reporter Lee Myunghwan] Hana Financial Investment announced on the 24th that it maintains a buy rating and a target price of 15,000 KRW for Sollid. This is because it is expected to achieve high earnings growth this year, and the recent stock price decline has increased its price merit.

Sollid's consolidated sales for the first quarter of this year increased by 18% year-on-year to 38.5 billion KRW, and the operating loss narrowed to 2.7 billion KRW, recording an earnings shock. This contrasts with the previous quarter, the fourth quarter of last year, when it recorded an earnings surprise with a consolidated operating profit of 13 billion KRW.

Hana Financial Investment explained that the large fluctuations in earnings are due to material supply and development costs. In the fourth quarter of last year, operating profit surged due to sufficient raw material inventory and the reversal of O-RAN (Open Radio Access Network) development costs. However, in the first quarter, sales were delayed due to semiconductor supply shortages, while O-RAN development costs were amortized, resulting in an operating loss. This is evident from the fact that the headquarters' operating profit in the first quarter reached 2.4 billion KRW.

It was analyzed that Sollid's high quarterly earnings volatility is likely to continue into the second and third quarters. This is because the semiconductor supply issue persists, and the recognition of O-RAN sales and costs has a significant impact each quarter. Investors are also said to be fixated on short-term earnings due to distrust in the recovery of the 5G equipment sector's performance.

However, Hana Financial Investment advised focusing on annual earnings rather than quarterly results at this point. Sollid's consolidated operating profit for last year turned positive at 6 billion KRW, and it is highly likely that operating profit this year will triple compared to last year.

Researcher Kim Hongsik of Hana Financial Investment said, "Sollid's order backlog is significantly increasing mainly in the UK and the US, and O-RAN sales are beginning to contribute in earnest," adding, "Considering that all three major business sectors are performing well, Sollid's profits are expected to surge this year and next year."