[Click eStock] "KH Vatec, Stable Despite Smartphone Market Slowdown Concerns"

Yuanta Securities Report

Yuanta Securities evaluated KH Vatec, stating that despite concerns over the slowdown in the smartphone market, stable earnings growth is expected to continue. The investment opinion is 'Buy', with a target price of 23,000 KRW.

On the 22nd, researcher Lee Surim of Yuanta Securities stated in a report, "The client’s 2023 foldable phone production plan is approximately 15 million units, and if demand for new foldable phones increases in the second half of the year, the company's sales and operating profit are expected to be revised upward."

Samsung Electronics is expected to strengthen its foldable phone capabilities with hinge upgrades for the new Galaxy Z Fold5 and Z Flip5 models. Attention is focused on what changes this upgrade will bring.

Researcher Lee said, "KF Vatec, which supplies more than 90% of the external hinges to the largest client, is expected to benefit," adding, "The waterdrop hinge is expected to have a higher ASP compared to the previously installed U-shaped (barbell-type) hinge."

When estimating earnings, KH Vatec’s client foldable phone shipments are projected to increase by 22% year-on-year to 12 million units. It was assumed that the delivery ratio within the client is 85%, and the hinge ASP will rise by 30%.

The foldable phone market is expected to continue expanding. It is positive that many new foldable phones from Chinese-speaking companies such as Honor and Oppo were unveiled at MWC 2023 held in March.

Researcher Lee said, "The focus is on market expansion through popularization rather than price competition," adding, "Google plans to launch the 'Pixel Fold' in 3Q23, and Apple is continuously filing patents related to foldable technology, creating expectations for foldable phone launches in early 2024 to 2025."