[Click e-Stock] "RFHIC Expected to Deliver Solid Results in Both Defense and Telecommunications... Target Price Raised"

Target Price Raised by 13% Compared to Previous Estimate

On March 4, KB Securities raised its target price for RFHIC from 75,000 won to 85,000 won, stating that the company is expected to post strong results in both the defense and telecommunications sectors. The investment opinion remains 'Buy'.

Changmin Lee, a researcher at KB Securities, explained, "The reason for raising the target price is that we have increased our estimate for the average return on equity from 19.2% to 19.8% for the period 2026-2035, reflecting the upward revision of performance forecasts in the telecommunications and defense sectors due to favorable industry conditions."

KB Securities forecast that RFHIC’s first-quarter results this year will exceed consensus (the average of securities firms’ forecasts), with revenue expected to surge by 95% year-on-year to 62.3 billion won and operating profit to increase by 202% to 11.3 billion won. Lee noted, "While the telecommunications performance, including RF Materials, remains solid, significant growth is also anticipated in the defense sector. Notably, on February 19, the company disclosed a 50.6 billion won order contract with Raytheon, and based on this global client reference, additional orders are anticipated. The rising share of the highly profitable overseas defense segment is expected to further accelerate overall company performance improvement."

Alongside the steep improvement in results, both the defense and telecommunications sectors are drawing market attention as positive investment points. First, with the war between the United States and Israel and Iran escalating, interest in the defense industry is rising. Lee commented, "For the Cheongung II surface-to-air interceptor missile exported to the United Arab Emirates (UAE), the lack of combat experience has been cited as a weakness due to limited reference cases, but if references are secured through this war, expectations for additional orders may increase." RFHIC supplies radar power amplifiers for Cheongung II through LIG Nex1.

In addition, as Nvidia has formalized its equity investment in Lumentum and Coherent, interest in CPO (Co-Packaged Optics) is also growing. Lee explained, "RF Materials, a consolidated subsidiary of RFHIC, supplies pump laser packages to Lumentum, and as CPO is introduced in the future, the company is expected to benefit from the supply of optical amplifiers (EDFA)."