[This Week's Kwan.Jong.] Growing from Casino Monitors to Automotive Displays, Stepping on the Pedal

Tobis, a Specialist Manufacturer of Industrial and Gaming Monitors
Growth in Casino Gaming Display Module and Automotive Display Module Businesses
Stock Price Trending Upward Since Summer... Securities Firms Raise Tobis Target Price Successively

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The stock price of Tobis, a company specializing in industrial and gaming monitors, has been on the rise since summer. The intraday peak growth rate this year has even exceeded 100% compared to the previous year. With the COVID-19 endemic, global demand for casino gaming display module business and growth in the automotive display module business are expected. Along with its core business, rapid performance improvement is anticipated as sales begin to occur in new business areas.

Tobis is a company that manufactures industrial monitors used in casino gaming machines, TFT-LCD modules, and touch panels for devices. In 2014, it demonstrated its technological prowess by introducing the industry's first curved monitor in the casino gaming sector. It also manufactures automotive displays. Tobis entered the automotive display module business in 2020. The company was listed on the KOSDAQ market in November 2004. In the casino game display sector, Tobis counts global top casino game machine companies such as the U.S.-based IGT (International Game Technology) and KONAMI, as well as LG Display and Hyundai Mobis, among its clients. The largest shareholder is CEO Kim Yong-beom, holding a 9.83% stake. Including special related parties, the largest shareholder group holds 15.09%.

The Leader in Casino Monitors

On a consolidated basis, Tobis posted sales of KRW 191 billion and operating profit of KRW 10.6 billion in the first half of this year. Sales increased by 30.07% year-on-year, and operating profit turned positive. Breaking down the details, sales from industrial monitors amounted to KRW 121.922 billion, accounting for 63.83% of total sales. Automotive displays and mobile TFT-LCD modules accounted for KRW 60.98 billion (31.92%), and others KRW 8.115 billion (4.25%). The company generates 85.98% of its total sales from exports.

The performance improvement is driven by the industrial monitor segment. The growth trend was supported by launching new products and attracting new clients in line with the COVID-19 endemic. In the second quarter, sales in the industrial monitor segment reached KRW 66.5 billion, a 75.3% increase compared to the same period last year. The casino industry’s revival due to the endemic benefited Tobis. Increased orders from existing North American clients, as well as increased volumes from Southeast Asian clients in Singapore and Vietnam and European clients, contributed to this growth.

The securities industry is paying attention to Tobis because of growth in its core business and subsidiaries. Sales expansion continues in the industrial monitor segment. The automotive business is expected to surpass the break-even point (BEP). Additionally, sales from subsidiaries are expected to be recognized.

Regarding the automotive display business, the domestic Seocheon plant is operating smoothly. Full operation of the Sacheon plant is expected by the end of the year. In May, Tobis held a completion ceremony for its automotive display factory in Seocheon-gun, Chungnam Province. The Seocheon plant is a dedicated automotive display production facility built on a 17,000-pyeong site with a four-story building totaling 5,000 pyeong of floor area.

In May, Tobis acquired Glowquadtech. Its performance will be consolidated from the third quarter. Glowquadtech provides communication controllers and solutions for electric vehicle charging. It has secured clients such as BYD, CATL, and SK Signet. As of last year, the company achieved sales of KRW 12.5 billion and operating profit of KRW 5.6 billion. Following Sale High Tech, Glowquadtech has joined Tobis’s electric vehicle charging business. Sale High Tech produces adhesive films and tapes made of special materials and supplies them to domestic and international clients including LG Chem. Notably, it developed swelling tape, a core material for secondary batteries. With Glowquadtech joining as a subsidiary, it is incorporated into the company’s electric vehicle value chain division, and synergy effects between divisions are expected.

Due to this growth potential, securities firms have raised or newly set target prices for Tobis. For example, Bukook Securities raised its target price from KRW 15,000 in May to KRW 24,000 on the 4th of this month. DS Securities also raised its target price from KRW 17,000 in March to KRW 24,000 last month. Researcher Eom Tae-woong of Bukook Securities said, "Tobis’s investment point lies in mid- to long-term profit growth driven by global demand increase in the casino gaming display module business," adding, "Completion of Seocheon plant operation by year-end and rapid external growth of the automotive display module business due to increased operation rate of the Dalian plant in China are also expected." Researcher Cho Dae-hyung of DS Investment & Securities explained, "The automotive displays, supplied mainly to global parts companies, are undergoing sales efforts to secure additional clients such as automakers," and added, "New casino openings in Japan and Thailand are also anticipated, and after 2025, additional valuation attractiveness is expected due to upward revisions in earnings forecasts."

New Growth Engine: 'Automotive Monitors'

Securities firms expect Tobis’s sales to increase sharply. The company reversed its performance from an operating loss of KRW 900 million on sales of KRW 263.4 billion in 2021 to operating profit of KRW 7 billion on sales of KRW 328.2 billion last year. This year, sales of KRW 468.1 billion and operating profit of KRW 7 billion are expected. Particularly, next year, sales of KRW 468.1 billion and operating profit of KRW 33.2 billion, and in 2025, sales of KRW 646.3 billion and operating profit of KRW 56.4 billion are forecasted, indicating rapid growth.

The key is growth in automotive displays. Bukook Securities forecasts automotive display sales to increase from KRW 189 billion this year to KRW 334 billion next year. DS Investment & Securities projects Tobis will achieve sales of KRW 339.2 billion in 2024. Currently, the automotive industry is transitioning to software-defined vehicles (SDV). Cars are no longer just means of transportation but are transforming into moving spaces where customer experience is crucial, resembling electronic devices. For this, the adoption of displays capable of containing various information, including content, is essential. Researcher Jung Won-seok of Hi Investment & Securities said, "The SDV era in the automotive industry will lead to the popularization of vehicle screens," explaining, "It is essential to provide new services to consumers by increasing the freedom of physical controls with functional limitations, and as electric vehicles and autonomous driving technologies advance, providing diverse information becomes necessary." Researcher Cho Dae-hyung added, "Automotive displays produced at domestic factories are applied to Hyundai and Kia vehicles through Hyundai Mobis and Denso Korea," and noted, "Recently, Tobis revealed that display modules are applied to Kia’s Sorento facelift model," adding, "Expansion of application to other facelift models is also expected."

However, this does not mean that sales of industrial displays are declining. Sales in this segment are also expected to steadily increase. According to a report by Technavio in November last year, the global slot machine market is expected to grow at an annual rate of 12.3% until 2026. The market size is projected to exceed approximately KRW 12 trillion by 2026.

In particular, steady replacement demand is a solid pillar for Tobis. Due to the nature of slot machines operating 24/7, industrial monitor displays have a replacement cycle of every three years. In other words, once sales occur, steady performance follows. DS Investment & Securities expects sales to increase from KRW 243.5 billion this year to KRW 273.9 billion next year, while Bukook Securities forecasts growth from KRW 249 billion to KRW 281 billion. Researcher Kwon Min-gyu of Shinhan Investment Corp. explained, "Casino gaming monitor products have a lifespan of about three years, and 80% of total sales come from replacement demand," adding, "(Tobis) supplies to the global top 1 to 4 companies, generating steady replacement demand, and new market development will add additional new volumes."

However, the emergence of infectious viruses such as COVID-19 can always pose risks. COVID-19 significantly disrupted demand for casinos and automobiles. During the pandemic, factors such as quarantines caused delays in production and supply of parts like vehicle semiconductors, reducing global automobile production. Additionally, travel restrictions affected casinos mainly located in resort areas, causing difficult times. Indeed, Tobis’s performance also recorded losses from 2020 to 2021, the years immediately following the outbreak of COVID-19.