[Click eStock] "KH Vatec, Expecting Peak Season Effect in Second Half"

IBK Investment & Securities Report

[Asia Economy Reporter Minji Lee] IBK Investment & Securities maintained a buy rating and a target price of 30,000 KRW for KH Vatec on the 24th, expecting improved performance in the second half of the year.

In the second quarter, KH Vatec's sales amounted to 58.3 billion KRW, down 18.6% from the previous quarter. The main cause was a decrease in volume from domestic clients. Hinge sales slightly increased compared to the first quarter. The hinge shipment volume for the first half of the year was around 2 million units. Operating profit was 3.7 billion KRW, down 24.4% from the previous quarter.

The company's expected sales for the third quarter are approximately 188.3 billion KRW, about 3.5 times higher than the second quarter. Researcher Kim Unho of IBK Investment & Securities said, "The main reason is a significant increase in hinge volume," adding, "The third quarter shipment volume is expected to exceed 8 million units, and the unit price per product is expected to decline compared to previous products."

KH Vatec's operating profit improvement trend is also expected to accelerate from the third quarter. The operating profit margin is predicted to improve to 10%, up from the previous 7%.

KH Vatec's main products include hinges, IDC, brackets, and end plates for batteries. The component with the highest sales proportion is the hinge, and this trend is expected to continue for the time being. IDC is still in the early development stage. The bracket is expected to show effects from the normal operation of the production line in India this year. Sales of battery end plates have high growth potential but are expected to start in earnest from 2023.

Researcher Kim Unho analyzed, "After a sluggish first half, performance is significantly improving from the second half," adding, "The company holds growth momentum through the production of core foldable components, and there is still a high possibility of new products and expansion of new clients, so additional growth is expected."