Tovis
The author is an analyst for NH Investment & Securities. He can be reached at esshim@nhqv.com -- Ed.
Along with continued high sales growth for casino monitors, a full-scale earnings turnaround at Tovis’s automobile display division is set to start from 3Q23. The recent acquisition of GloquadTech, an EV charging solution player, should generate favorable synergies and contribute to overall earnings performance.
NDR review: Casino monitor sales clocking strong, automobile display domain still looks promising
After Tovis reported its 1Q23 results, we held an NDR for the firm with domestic institutional investors. The company posted consolidated 1Q23 sales of W87.8bn (+10.2% y-y, -1.4% q-q) and OP of W3bn (+908.0% y-y, +14.9% q-q; OPM 3.4%), falling shy of our estimates. However, its sales of casino monitors continue to clock strong, and we expect a steady earnings turnaround at its automobile display division from 3Q23.
Tovis’s sales of industrial monitors hit W55.5bn in 1Q23, setting a new quarterly sales record for the firm despite both a falling dollar/won rate and the presence of off-seasonality. But, earnings at the automobile display division proved languid due to delayed launches of new models and facelift models at a client.
Anticipate visible earnings growth from 3Q23
Moving ahead, Tovis’s sales towards global slot machine makers, including ATA, IGT, L&W (SG), and Konami, should continue on an upward trajectory. In addition, an anticipated gradual rise in sales toward European clients also should help spur earnings growth. External environment factors (such as freight and panel prices) that adversely affected past profitability are to normalize, resulting in qualitative growth.
We expect to see the start of a full-scale earnings turnaround at automobile display division from 3Q23, starting with the supply of displays for facelift models to global parts suppliers. Meanwhile, we believe that the utilization rate at the firm’s Chinese manufacturing facilities will rise gradually going forward. And, with operations at a recently expanded Seocheon plant to start from June, capacity expansion effects should be witnessed from 3Q23. The recent acquisition of an EV charging solution player, GloquadTech (35.98% stake), is also anticipated to contribute to overall earnings performance from 3Q23. Moreover, favorable synergies with Seilhitec (acquired last year) should also help to secure steady mid/long-term earnings growth.