[Click e-Stock] "Doosan Profit Forecast Soars... Target Price Raised to 500,000 Won"

On May 2, DS Investment & Securities announced that it had raised its target price for Doosan from 450,000 won to 500,000 won, citing a significant increase in this year's net profit forecast due to the rapid growth of Doosan's Electronics BG.

Doosan is the holding company of the Doosan Group and operates businesses such as the electronics materials business (Electronics BG) and integrated IT services (Digital Innovation BU). Electronics BG sources copper foil from Lotte Energy Materials and Solus Advanced Materials to manufacture copper-clad laminates (CCL), which are then supplied to printed circuit board (PCB) manufacturers in Taiwan and other countries, who in turn supply to Nvidia. As demand for Nvidia's AI accelerators increases, demand for the CCL produced by Doosan's Electronics BG is also rising.

Doosan also owns subsidiaries engaged in manufacturing forged products, power generation equipment, and desalination equipment (Doosan Enerbility); production and sales of compact construction machinery and portable power equipment (Doosan Bobcat); supply of fuel cell equipment for power generation and long-term maintenance services (Doosan Fuel Cell); system semiconductor testing (Doosan Tesna); advertising agency and magazine publishing (Oricom); and collaborative robot manufacturing and solutions (Doosan Robotics).

DS Investment & Securities assessed, "This year, Doosan's Electronics BG has entered the next level." Electronics BG's first-quarter revenue, announced at the end of last month, was 402.9 billion won, up 116% year-on-year and surpassing DS's estimate of 355 billion won. The operating margin also reached 28.8% (operating profit of 116.1 billion won), far exceeding the estimate of 15%. Accordingly, DS raised its 2024 Electronics BG performance forecasts significantly: revenue from the previous 1.39 trillion won to 1.63 trillion won, and operating profit from 210 billion won to 468 billion won. The net profit forecast for Electronics BG this year was also raised sharply from 157 billion won to 351 billion won.

However, DS lowered the Electronics BG multiple (the earnings multiple used in corporate valuation) for Doosan from 22 times to 15 times based on this year's estimates. The target multiple of 15 times is a 10% premium compared to competitor Taiwan EMC's 13 times. Analyst Kim Suhyeon explained, "The downward revision of the multiple reflects concerns about an economic downturn due to tariffs, a decline in market multiples, a drop in multiples of downstream customers, and a decrease in competitor multiples," adding, "Since this year's estimated operating margin is 20% for EMC and nearly 30% for Doosan Electronics BG, a 10% premium is not excessive."

Despite the multiple downgrade, DS raised the target price for Doosan Electronics BG from 450,000 won to 500,000 won due to the significant increase in net profit forecasts. In this case, the value of the Electronics BG is 5.3 trillion won.