[Click e Stocks] "PHA, Several Years of Flat Performance"

[Asia Economy Reporter Junho Hwang] Hana Securities has lowered the target price of PHA, an automobile parts manufacturer, to 11,000 KRW. This adjustment follows concerns that, with net cash assets exceeding 70% of the market capitalization and a price-to-book ratio (PBR) of 0.22, the company's valuation remains extremely low, indicating a need for momentum to overcome stagnation.

PHA recorded an operating profit margin of 2.9% in the second quarter of this year. Although profitability improved from 0.0% in the previous quarter, it decreased by 0.6% compared to the previous year. Labor costs and export expenses increased by 14% and 357% year-on-year, respectively, resulting in a 3.5 percentage point rise in the ratio of expenses to sales compared to the previous year.

Furthermore, the price-to-earnings ratio (PER) stands at 5 times, and the PBR remains at 0.22, limiting the potential for stock price growth. PHA's market capitalization is approximately 148.5 billion KRW, while net cash assets amount to 110.8 billion KRW.

Researcher Seonjae Song of Hana Securities analyzed, "This low market capitalization is due to stagnant sales and reduced profitability over the past six years. The failure to discover new growth drivers after Active Hood and Power Trunk, combined with production stagnation at client companies, significantly impacted the poor sales performance of major subsidiaries."

He added, "A revaluation of the stock price requires clear performance improvements, driven by increased production at client companies, discovery of new growth items, and cost reduction efforts. For a more structural recovery in profitability, it is necessary to secure growth items such as wireless charging solutions for electric vehicles and meaningful new customers."