[Click eStock] Inox Chemdot Materials, Q3 Outlook Adjustment Needed... Undervaluation Phase Continues

[Asia Economy Reporter Lee Seon-ae] IBK Investment & Securities announced on the 21st that it maintains a Buy rating on Enox Advanced Materials but lowers the target price to 45,000 KRW. This is because there are not many variables that will immediately change the earnings, so it is judged that investment should be approached conservatively for the time being. The target price was set by applying a price-earnings ratio (PER) of 8.8 times to the expected earnings per share (EPS) of 5,132 KRW in 2022.

However, the reason for maintaining the Buy rating is that benefits are expected from the growth of the OLED TV market, and record-high earnings are anticipated in 2022. Kim Un-ho, a researcher at IBK Investment & Securities, stated, "We believe that the company has secured additional growth drivers by entering the Fold market, and currently, the stock price is undervalued compared to its earnings."

Sales in the third quarter of 2022 are expected to be 136.4 billion KRW, a 4.6% decrease compared to the second quarter. This is a decrease from the previous forecast. Sales in all business divisions are expected to decline compared to the second quarter. This is analyzed as an impact of sluggish demand in the downstream industries. In particular, INNOLED is expected to perform significantly worse than previously forecasted. Operating profit for the third quarter of 2022 is expected to be 30.5 billion KRW, which is also a decrease from the previous forecast. The decline in profitability due to decreased sales and the impact of the rising KRW-USD exchange rate are expected to act in combination, but the operating profit margin is expected to be maintained at the second quarter level.

Enox Advanced Materials' sales in 2022 are projected to increase by 9.1% to 531.8 billion KRW compared to 2021. Sales in the second half of the year are expected to decline compared to the first half. This is because the INN OLED sales, which were expected in the second half, are forecasted to be sluggish. As a result, the annual sales are also expected to fall short of previous forecasts. The main reason is that LGD's shipments of large OLED panels are below expectations. Demand recovery is expected to be possible in 2023.