[Click eStock] "Iljin Electric Expands Production Capacity... Target Price 25,000 Won"

On the 27th, SK Securities issued a new buy rating and a target price of 25,000 KRW for Iljin Electric, stating that "the investment point is the expansion of production capacity (CAPA)." The closing price on the previous day was 19,300 KRW.

On the same day, SK Securities analyst Nam Min-sik said, "The target price was calculated by applying a price-to-book ratio (PBR) of 3 times to this year's book value per share (BPS) of 8,397 KRW," adding, "Although the target PBR has surpassed the historical band's upper limit, it reflects the improved profitability of medium-voltage electrical equipment due to the U.S. power equipment boom, the first in 15 years."

He also stated, "This year's sales are expected to increase by 7.8% to 1.343 trillion KRW, and operating profit is projected to rise by 11.6% to 68 billion KRW," adding, "The order backlog is estimated at 1.896 trillion KRW (a 10.7% increase), with an order backlog to sales ratio of 1.4 times." This assumption is based on North American utility companies' capital expenditures (CAPEX) growing by 15-20%, and that power equipment production volume will increase after the completion of the Hongseong 2nd factory next year.

On September 8th last year, Iljin Electric announced, "To respond to the increased demand for ultra-high voltage transformers, we will construct a new factory worth 68 billion KRW." The expansion will be built on idle land near the existing Hongseong 1st factory industrial complex, so there are no additional land acquisition costs. The target date for normal operation is December this year.

Analyst Nam forecasted, "Sales from the expansion will increase medium-voltage electrical equipment sales from 260 billion KRW before expansion to 433 billion KRW after expansion," and "the cable division's sales will rise from 380 billion KRW before expansion to 620 billion KRW."

He added, "As of last year, 76% of Iljin Electric's sales came from the cable division, and the remaining 23% from the medium-voltage electrical equipment division. Contrary to the preconceived notion that cable and power equipment companies are already in a mature stage, sales have steadily increased," noting, "The compound annual growth rate (CAGR) of sales over the past five years was 10.4%. Except for 2019, which was affected by COVID-19, sales have continuously risen."