[Click eStock] "BH, Excessive Undervaluation... Target Price Down"

Target Price Downgraded from 33,000 KRW to 22,000 KRW

KB Securities on the 14th viewed BH as severely undervalued and lowered its target price from 33,000 KRW to 22,000 KRW. The investment rating was maintained at 'Buy.'

Lee Chang-min, a researcher at KB Securities, explained, "The reason for lowering the target price is due to assumptions of continued weak IT demand and additional demand slowdown caused by tariff policies of President-elect Donald Trump, leading us to revise the average return on equity from 12.5% to 10.2% for 2024-2033." He added, "The valuation is below historical lows, indicating severe undervaluation, so we maintain the investment rating."

KB Securities estimated BH's Q4 earnings this year to be 506.9 billion KRW in sales, a 1% decrease year-on-year, and operating profit of 30.2 billion KRW, a 97% increase. The researcher analyzed, "Sales to North American customers for smartphones are expected to slightly decrease compared to the previous quarter, but overall sales will grow as OLED tablet sales, which start shipping this quarter, are newly reflected. Profitability is expected to decline compared to the previous quarter due to one-time costs such as initial operating expenses and performance bonuses related to the new IT OLED line."

Next year's performance is expected to improve compared to this year. The researcher forecasted, "Annual sales next year are expected to increase by 6% year-on-year to 1.8861 trillion KRW, and operating profit to rise by 8% to 132.3 billion KRW." He added, "Despite conservative assumptions on existing core business performance considering worsening external business conditions, performance improvement compared to the previous year is possible solely from the warm impact of new IT OLED line operations for tablet and automotive displays and growth in automotive parts performance of subsidiary BH EVS."

Portfolio diversification is progressing smoothly. The researcher said, "BH was previously evaluated as having limited growth potential due to smartphone sales to specific customers accounting for over 70% of total sales, but portfolio diversification is progressing smoothly as it has entered the automotive parts business and diversified application products beyond smartphones to other IT products."