[Click eStock] "HFR to Break 3Q Record High... Short-Term Sharp Drop Is a Buying Opportunity"

[Asia Economy Reporter Myunghwan Lee] Shinhan Financial Investment announced on the 31st that it maintains a buy rating and a target price of 48,000 KRW for HFR. The company also advised that the short-term sharp decline should be seen as a buying opportunity, as HFR is expected to deliver solid performance this year.

Shinhan Financial Investment projected HFR's Q3 sales this year to increase by 88% year-on-year to 107.4 billion KRW, and operating profit to rise by 114% to 27.1 billion KRW. This is an increase even compared to the surprise strong performance recorded in Q2, marking the highest quarterly results ever. However, it noted that in Q3, the supply of large-scale orders for North American clients, which are held as order backlog, is expected to be completed, and the rise in raw material prices may slightly reduce profit margins compared to Q2. Nevertheless, Shinhan Financial Investment expects HFR to record strong results by breaking the quarterly maximum performance.

For the full year, sales are forecasted to increase by 49% year-on-year to 307.7 billion KRW, and operating profit to grow by 206% to 66.8 billion KRW. Since equipment supply is concentrated in Q3, Q4 performance may slightly decline compared to the previous quarter, but Shinhan Financial Investment assessed that Q4 is likely to confirm orders to be supplied next year. It is expected that, as with this year, the orders will be from existing North American clients, and considering the investment trends of North American telecom companies, large-scale orders similar to or exceeding the 158.5 billion KRW order in November last year are anticipated.

The new business and orders currently being prepared are also progressing smoothly, according to the assessment. It was noted that 5G private networks have started generating small-scale domestic and international sales along with test volume supply. If successful in securing full-scale project orders by the end of the year, this will act as a significant factor for sales growth next year. Additional large-scale orders are also expected, as supply discussions and tests are underway with other telecom companies besides existing North American clients.

Shinhan Financial Investment highlighted that HFR’s mid- to long-term order backlog confirmation is the most prominent factor within the industry. Researcher Youngmin Ko of Shinhan Financial Investment explained, "Considering the 5G investment trends in the North American region, the rapid growth over the past two years is likely to continue at least until 2023," adding, "This is the reason why we believe there is a buying opportunity during the short-term sharp decline caused by macro uncertainties."