Lowered Earnings Expectations Due to Weak Orders in the Second Half of 2023
Buying Approach Valid When Stock Price Drops Excessively
Shinhan Investment Corp. lowered the target price for Taekwang from 22,000 KRW to 18,000 KRW on the 5th due to downward revisions in earnings estimates. The investment rating of 'Buy' was maintained.
Lee Dongheon, a researcher at Shinhan Investment Corp., stated, "The consolidated results for Q4 2023 recorded sales of 71.3 billion KRW, operating profit of 7.5 billion KRW, and an operating margin of 10.5%," adding, "The sluggish order intake is somewhat disappointing." However, he noted that orders were concentrated in December and recently showed a recovery trend, which is positive.
Lee said, "Orders in 2023 amounted to 252.2 billion KRW, similar to 2022," adding, "However, there was a clear pattern of strong performance in the first half and weaker in the second half, and 2024 is expected to be better in the second half." The sales proportion is 55% in the Middle East (31% in 2021) and 22% in North America (12% in 2021), accounting for 77% of the total from these two markets. Meanwhile, Asia decreased to 21% (50% in 2021).
The use of LNG is expected to increase until 2040, and production projects are also rapidly increasing. Lee said, "Middle East investments will continue to rise along with oil price recovery, but there are project delays due to high interest rates and the war impact is also a variable," adding, "We expect orders for projects delayed in 2023 to be placed in 2024." He forecasted that the earnings outlook for 2024 should be lowered due to sluggish order intake in the second half of 2023. Lee said, "Reflecting earnings fluctuations due to order delays, we lower the target price to 18,000 KRW," adding, "An approach from a buying perspective is valid in case of excessive stock price decline."
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