[Click e-Stock] "Solid to See Earnings Rise from Second Half on Growing U.S. Demand"

Maintaining Buy Recommendation

On June 10, Hana Securities maintained its "Buy" investment rating and target price of 15,000 won for Solid, stating, "The U.S. telecommunications equipment market is developing more positively than expected, and we anticipate a full-fledged improvement in performance starting in the second half of the year."

Kim Hongshik, a researcher at Hana Securities, said, "Solid posted consolidated sales of 55.8 billion won and operating profit of 300 million won in the first quarter, representing a year-on-year decrease of 26% and 96%, respectively." He analyzed, "The main factors behind this earnings shock were the seasonal off-peak period for its defense subsidiary Wintec and the base effect from the first half of 2024." He added, "However, sales in the telecommunications segment are recovering, and with the expansion of the U.S. Open RAN market, performance improvement is expected to become more pronounced from the second half of the year."

In the United States, the Federal Communications Commission (FCC) and Congress are expediting 5G frequency auctions, which may result in a wider-than-expected allocation of frequencies. At the same time, as regulations on Chinese components and equipment become stricter, the Open RAN market is expanding. In Korea, major events such as frequency auctions are also scheduled for the second half of the year. Regarding this, he said, "In the past, frequency auctions have led to network upgrades and revisions of telecom operators' pricing plans." He evaluated, "If the same developments occur in the second half of this year, both short- and long-term investments in Solid will be promising."

From a valuation perspective, the stock is also considered to be in an undervalued range. Kim stated, "Whenever expectations for network evolution have risen in the past, Solid's multiples have invariably increased rapidly." He added, "Currently, the stock is in a historically excessive undervaluation, but I do not expect this situation to persist for long."