[Click eStock] "DTR Automotive, Annual Net Profit Expected to Reach 100 Billion KRW... Undervalued"

[Asia Economy Reporter Ji Yeon-jin] Hana Financial Investment stated on the 31st that it expects DTR Automotive to achieve an annual net profit exceeding 100 billion KRW and that the current corporate value is undervalued.

Song Seon-jae, a researcher at Hana Financial Investment, said, "DTR Automotive's price-to-earnings ratio (PER) is below 6 times," adding, "Although the debt ratio temporarily increased due to borrowing for the acquisition of Doosan Machine Tools, considering the profit-generating capacity and the repayment schedule of the borrowings, the financial burden will gradually ease." He explained, "Considering the global competitiveness ranked 3rd to 4th and differentiated growth potential and profitability in both vibration isolation products and machine tools sectors, the current stock price is judged to be undervalued."

The company recorded sales and operating profit of 626.1 billion KRW and 55.1 billion KRW respectively in the first quarter. Since February, the performance of Doosan Machine Tools (100% stake) has been consolidated, resulting in sales and operating profit increasing by 154% and 138% year-on-year respectively. Even excluding this, sales from existing businesses showed growth with vibration isolation products up 8% and batteries up 36%.

Despite sluggish conditions in the finished car industry, vibration isolation products saw increased deliveries to major customers such as Stellantis and GM’s SUV and pickup models due to customer diversification, and the rise in exchange rates also contributed to the strong performance. Battery sales grew 36% year-on-year due to increased deliveries to North American finished car manufacturers, wholesale distributors, and large discount stores, which were secured last year.

Researcher Song noted that Doosan Machine Tools contributed 346.6 billion KRW in sales over two months, and if fully reflected in the first quarter, it would have been about 520 billion KRW. He added, "DTR Automotive’s first-quarter expenses included 5.3 billion KRW in M&A-related fees and three months’ worth of interest expenses following the completion of the Doosan Machine Tools acquisition at the end of January. The controlling shareholder net profit for DTR Automotive in the first quarter was 28.3 billion KRW, but after adjusting for non-recurring expenses and reflecting three months of Doosan Machine Tools’ performance (two months’ net profit was 31 billion KRW), it is estimated to have been in the 40 billion KRW range."

After adjusting for these non-recurring factors, the operating profit margin was recorded at around 9%, and the EBITDA margin, excluding amortization factors, was analyzed to be above 12%.