[Click eStock] "BH, Earnings Showing Lower Highs and Higher Lows... Focus on Mid- to Long-Term Growth Potential"

Kiwoom Securities maintained a buy rating and a target price of 42,000 KRW on BH on the 25th, stating that despite the undervaluation phase, the company’s products are expected to have solid demand, with mid- to long-term growth potential driven by an increased proportion of automotive electronics and the expansion of devices applying organic light-emitting diode (OLED) technology.

BH’s performance this year is expected to show a clear seasonality, with operating profits of 20.2 billion KRW and 109.8 billion KRW in the first and second halves, respectively. Although operating profit in Q1 was 8.9 billion KRW due to a decrease in shipments of FPCB (flexible printed circuit boards) for smartphones and costs related to the acquisition of BH EVS (vehicle wireless charging module business), a rebound in performance is anticipated in the second half with new product launches by North American clients and the release of foldable smartphones by domestic customers.

Furthermore, as in the previous year, production for new products is understood to have started in earnest from Q2, and contrary to early-year concerns, BH’s product demand is expected to remain solid due to specification changes in North American clients’ new products and weakening competitiveness of panel manufacturers in the Greater China region. Additionally, profitability is expected to improve as the new BH EVS business segment is projected to turn profitable from the second half of the year.

Oh Hyun-jin, a researcher at Kiwoom Securities, said, “BH is at a point where attention is needed for its mid- to long-term growth potential through the expansion of automotive product proportions and devices applying OLED technology,” adding, “The vehicle wireless charging business through BH EVS is expected to generate sales of 246.3 billion KRW this year, and sales of FPCB for BMS, which replaces wire harnesses in EV batteries, are rapidly increasing, with automotive product sales expected to account for 18% of total sales in 2023.”

He continued, “We believe it is time for the stock price to reflect expectations for the expansion of OLED-applied IT devices such as tablets,” and said, “Tablet products are expected to begin full-scale production in 2024, and considering conservative assumptions about shipment volumes of OLED-applied models and customer market share, as well as rising average selling prices (ASP), sales contributions exceeding 100 billion KRW are expected from 2024.”

BH is analyzed to be capable of transferring its listing to the KOSPI as early as the first half of the year. Past companies that transferred their listings to KOSPI showed improved supply and demand conditions, such as a decrease in short-selling balances, and BH is also expected to benefit from enhanced valuation and liquidity through the transfer.