[Click eStock] "BH, Earnings Slowdown Until Hwangbangi... Target Price Down"

Target Price Lowered from 30,000 Won to 24,000 Won

NH Investment & Securities on the 20th forecasted that BH's performance will continue to slow down until the first half of the year and lowered the target stock price from 30,000 KRW to 24,000 KRW. The investment opinion was maintained as 'Buy.'

Researcher Lee Gyu-ha of NH Investment & Securities explained, "Considering the slowdown in smartphone sales of North American clients, we lowered the earnings estimates and adjusted the target stock price downward. However, since sales are diversifying not only into smartphones but also into automotive electronics and tablets, and mid- to long-term growth is expected to continue, we maintain the 'Buy' investment opinion."

NH Investment & Securities revised BH's operating profit forecast for this year down by 32.3% to 89.9 billion KRW, which is a 5.1% increase compared to the same period last year. Researcher Lee said, "Sales of North American smartphone companies are unlikely to recover until next year due to intensified competition in China and the absence of on-device artificial intelligence (AI) functions. Considering the volume decrease and clients' cost-cutting efforts, BH's margins are also expected to be negatively affected, leading us to lower the operating profit forecast."

BH's operating profit in the fourth quarter of last year was 16.1 billion KRW, down 37.5% from the same period the previous year, significantly missing the consensus (average securities firm forecast). Researcher Lee stated, "This was due to higher-than-expected one-time costs related to IT OLED new line setup, outsourcing processing fees, and performance bonuses. Although performance will continue to slow until the first half of the year, a successful launch of tablets equipped with OLED and the expansion of AI functions in new models by North American clients could lead to a stock price recovery."

Despite the performance slowdown, the current stock price is considered excessively undervalued. Researcher Lee said, "Despite negative factors such as decreased client sales and performance slowdown, the current stock price is judged to be in an excessively undervalued range with a price-to-earnings ratio (PER) of 7.3 times based on 2024 earnings per share and a price-to-book ratio (PBR) of 0.8 times based on net asset value per share. In the mid- to long-term, performance is expected to improve with the expansion of automotive electronics business and the application of OLED in tablets and laptops, which will alleviate valuation discounts."