[Click eStock] "SFA, Order Backlog Expected to Reach 1 Trillion Won... Stock Undervalued"

Korea Investment & Securities Report

[Asia Economy Reporter Minji Lee] Korea Investment & Securities maintained a buy rating and a target price of 59,000 KRW for SFAC on the 24th.

In the first quarter, SFAC's consolidated sales amounted to 410.9 billion KRW and operating profit was 50.5 billion KRW, representing growth of 16% and 19% respectively compared to the same period last year, slightly exceeding market expectations. The order backlog stood at 744.9 billion KRW as of the end of the first quarter, marking the highest level since the fourth quarter of 2019.

In the second quarter, orders from domestic and overseas secondary battery companies, domestic logistics centers, and Chinese display-related orders are expected to bring the order backlog close to 1 trillion KRW by the end of the quarter. An order backlog reaching 1 trillion KRW would be the first time in over five years since the first quarter of 2017.

Junghwan Kim, a researcher at Korea Investment & Securities, stated, “Investments by clients such as SK On and European secondary battery companies will continue to increase at least until 2025, and SFAC is gaining momentum by securing large-scale orders for smart logistics equipment that has been prepared for over five years.” He added, “We expect new orders of 750 billion KRW in the first half, which is similar to the annual order amounts of 800 billion KRW in 2020 and 2021.”

Accordingly, new orders for this year are predicted to increase by 61% year-on-year to 1.27 trillion KRW. By sector, the display segment is expected to account for 420 billion KRW, secondary batteries 430 billion KRW, general logistics 290 billion KRW, and semiconductors 130 billion KRW. Due to the notable growth in the secondary battery and logistics sectors, the non-display segment is expected to exceed 70% of the total. Display equipment orders are also expected to increase compared to the previous year, driven by Samsung Display’s investments in 6th and 8.5th generation RGB OLED, and the resumption of Chinese mobile OLED investments, which had previously declined due to reduced demand.

From the second quarter onward, domestic and international equipment investment cycles are expected to resume, leading to upward trends in orders, profits, and valuation. The valuation attractiveness is also significant. Researcher Kim explained, “Daifuku, a competitor group, derived 60% of its orders last year from the semiconductor and display sectors, yet its current 12-month forward PER is 20 times, higher than SFAC’s (in the 10s). Considering the recovery in display equipment orders and the increase and rising proportion of secondary battery and general logistics orders, the current stock price is undervalued.”