2022E Dividend Yield at 4.4%

The author is an analyst of KB Securities. He can be reached at newday@kbfg.com. -- Ed.

 

Lower target price to KRW37,500; maintain BUY   

We lower our 12m TP by 11.8% from KRW42,500 to KRW37,500 (12m fwd BVPS x 0.78x target P/B). Changes in beta and yields on 1y monetary stabilization bond (RFR) and 30y KTB (TGR) offset upward earnings estimate revisions. Despite the lower TP, we maintain BUY given 26.7% upside (31.4% incl. div. yield) after the recent stock pullback. 

Stock price falling amid KOSPI correction and U.S. housing market concerns       

After a lift from the 2Q22 earnings surprise, the stock has been pulling back from end-August amid the KOSPI correction and concerns over slowing U.S. housing market indicators. In September, Doosan Bobcat fell 17.9% (vs. KOSPI at -12.8%). Only ~15% of revenue comes from construction (incl. housing), with the remaining related to a wide range of downstream industries (e.g., agriculture, civil engineering, stockbreeding, logistics). However, its well-diversified portfolio has been unable to defend against surging mortgage rates and the first downturn in housing prices in a decade. 

3Q22 earning surprise likely     

We forecast 3Q22 K-IFRS consolidated revenue at KRW2.0tn (+29.9% YoY) and OP at KRW245.0bn (+89.0% YoY; 12.2% OPM), far above the market consensus (KRW183.5bn). In fact, we expect another earnings surprise. Robust demand in major markets (e.g., Americas, Europe) has allowed costs to be smoothly passed through to prices. Also, a 11.0% jump in KRW/USD (1,292.9 in 2Q22→1,434.8 in 3Q22) should contribute to earnings improvement. 

2022E dividend yield at 4.4% (year-end DPS of at least KRW700)

Interim dividend payments were resumed on Jun 30, ending a lull due to the pandemic. We estimate total annual DPS at KRW1,300 (4.4% div. yield; incl. KRW600 interim DPS, at least KRW700 year-end DPS). Amid current economic turbulence, we believe the high and stable dividend offers downside support for the stock.  

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