[Click e-Stock] "Rino Gong-yeop, High Market Expectations Are a Burden"... Target Price ↓

Kiwoom Securities on the 24th maintained a Buy rating on Leeno Industrial despite short-term earnings weakness due to expanding recession concerns and inventory adjustments by major customers, but lowered the target price from 170,000 KRW to 160,000 KRW.

Leeno Industrial's Q2 sales this year are expected to decline 28% year-on-year to 65.7 billion KRW, and operating profit is forecasted to fall 43% to 23.7 billion KRW, missing market expectations. Although a quarterly earnings recovery is anticipated with the seasonal peak, the strength of the recovery is expected to fall short of market expectations as the impact of inventory adjustments by major customers continues.

Q2 sales by business segment are also expected to continue a significant year-on-year decline, with Leeno Pin down 23% to 23.1 billion KRW and IC Test Socket down 37% to 33.9 billion KRW.

Q3 sales are projected to decrease 15% year-on-year to 76.9 billion KRW, and operating profit to drop 33% to 28.0 billion KRW. Although this represents an improvement from the previous quarter, it is expected to significantly miss market consensus estimates. Park Yu-ak, a researcher at Kiwoom Securities, stated, "The intensity of inventory adjustments by customers, which began at the end of last year, is easing, and with the launch of new smartphones by North American customers, Leeno Industrial's quarterly earnings recovery is expected to continue." However, he added, "Weak demand in the smartphone market and delays in the launch of new IT products due to recession concerns will negatively affect the pace of Leeno Industrial's earnings recovery."

Park also noted, "Considering that earnings consensus remains high despite the shock in Q1 results, it seems market participants are largely overlooking these industry trends." He maintained the view that "Leeno Industrial's solid technological competitiveness will be beneficial when adopting 'foundry processes below 3nm and 6G communication technology' in the future," but added, "For a trend reversal in the stock price, another round of downward revision in earnings consensus amid the sluggish industry conditions is likely necessary."