Favorable Environment Begins Now
The author is an analyst of NH Investment & Securities. He can be reached at
esshim@nhqv.com. -- Ed.
Tovis manufactures industrial monitors and TFT-LCD modules. We maintain our expectations for high earnings growth on both recovering orders from casinos (in line with endemic status for Covid-19) and production capacity expansion for automobile display modules.
Earnings rising at industrial monitor domain (highest-ever quarterly sales) and losses narrowing at automobile display business
Tovis reported (provisional) 3Q22 sales of W92.4bn (+28.3% y-y, +37.3% q-q) and OP of W5.4bn (-42.2 y-y, TTP q-q), showing q-q improvement. Amid an ongoing recovery in the casino industry, industrial monitor sales likely reached W52.5bn, a new quarterly high for the firm. And, with automobile semiconductor supply issues having eased, LCD module sales at the firm’s automobile display business look to be rising steadily. On the non-operating side, Tovis booked losses due to accounting recognition of roughly W3bn in valuation losses for foreign currency borrowings at the Dalian subsidiary.
Time to look towards 2023—favorable environment begins now
Given both sound sales at the industrial monitor division and ongoing gradual improvement in the external business environment, we expect Tovis’s overall earnings to start growing in earnest from next year. A friendlier cost ratio amid drops in panel prices and maritime freight costs should continue to be reflected from 3Q22. In addition, we believe that order backlog at the company’s automobile display modules domain is rising, and favorable forex market conditions represent another positive.
Although we downwardly adjust our 2022 earnings estimates in light of tepid earnings at Tovis’s automobile display business, our earnings expectations remain upbeat for 2023 (when the firm’s automobile electrification-related display business should start contributing to earnings in earnest) and for 2024 (on full-year reflection of domestic capacity expansion effects). Synergies with the newly-acquired company Seil Hi-Tech should also unfold gradually going forward. All in all, it is time to start looking forward earnings growth from 2023.