[Click e-Stock] "DB HiTek to See Earnings Growth from Q2 on Iguhwansin Effect"

Target Price Raised

On July 23, DS Investment & Securities raised its target price for DB HiTek to 53,000 won and maintained its "Buy" rating, stating that a rebound in second-quarter earnings is expected due to the effect of "Iguhwansin" (replacing used products with new ones).

For the second quarter, DB HiTek's revenue is projected to reach 325 billion won, up 9% from both the previous quarter and the same period last year. Operating profit is expected to be 73 billion won, representing an increase of 39% quarter-on-quarter and 8% year-on-year. The operating margin is forecast to be 23%.

Lee Surim and Kim Jinhyung, analysts at DS Investment & Securities, commented, "Despite the sharp decline in the exchange rate, the effect of increased utilization rates will be reflected. More than 65% of sales are to China, and the share of sales to consumer goods exceeds 60%. The effect of the Iguhwansin policy continued throughout the first half, leading to a sustained rebound in DB HiTek's utilization rate."

China's second-quarter GDP growth rate was 5.2%, surpassing consensus expectations. As a result, major external uncertainties have been reduced due to the policy effects and the easing of US-China tariff negotiations. The analysts added, "In the second half of the year, the Chinese government continues to implement consumption-boosting policies such as government bond issuance and subsidy programs. As the policy to localize mass semiconductor production is also being strengthened, demand for the company's foundry business is expected to expand." They also projected, "Due to the anti-dumping investigation into Texas Instrument, the sales growth trend is likely to continue in the third quarter."

For 2025 on a consolidated basis, operating profit is forecast to reach 254 billion won, up 33% from the previous year, with an operating margin of 19.4%. DS Investment & Securities explained, "With the merger of DB Metal into the consolidated subsidiary DB World, DB Metal's operating loss of approximately 13 billion won is expected to be reflected from July."