[Click e-Stock] "Satrec Initiative's Turnaround Accelerating... Target Price Raised"

On August 14, LS Securities analyzed that Satrec Initiative’s turnaround is accelerating. The company maintained its "Buy" investment rating and raised its target price to 63,000 won.

Satrec Initiative posted consolidated sales of 44 billion won and operating profit of 2 billion won for the second quarter. While sales declined by 6.3% year-on-year, operating profit swung back into the black. Choi Jeonghwan, a researcher at LS Securities, stated, "Sales fell short of estimates, but operating profit exceeded expectations," adding, "The main reason for the sales miss appears to be slow revenue recognition due to insufficient cost input for order contracts."

LS Securities expects Satrec Initiative to deliver a performance with a low first half and a stronger second half this year. Choi explained, "The B2G business typically shows this pattern, and we estimate that cost inputs will be more concentrated in the second half than in the first half of 2025, leading to higher sales in the latter part of the year." He added, "For SpaceEye-T, the company’s proprietary optical satellite launched in March this year, commercial activities are underway, and we expect continued narrowing of losses through synergies with subsidiaries SIA and SIIS."

He continued, "Satrec Initiative is planning to launch additional proprietary satellites, so related raw material and outsourcing costs will continue to be incurred." He also noted, "However, these costs are expected to be partially offset in the short term through defense sales."

He further stated, "The annual operating margin for this year is likely to remain above 4.0%, as achieved in the first and second quarters." However, he predicted, "Quarterly margin rates will decline in the fourth quarter due to a concentration of personnel-related expenses, such as performance bonuses."