Segyung Hitech
The author is an analyst for NH Investment & Securities. He can be reached at kyuha.lee@nhqv.com -- Ed.
We raise our earnings forecasts and TP for Segyung Hitech to reflect the expansion of the foldable smartphone market, improved glass stick yields, and cost reduction at the firm. Over the mid/long term, the company is expected to benefit greatly from a diversification of foldable device products and customers.
Raise earnings forecasts and TP to reflect foldable market expansion and cost reduction effects
Adhering to a Buy rating, we raise our TP on Segyung Hitech from W23,000 to W25,000. Our TP hike reflects: 1) sales growth from strengthening global foldable smartphone shipments; 2) improved glass stick yields; and 3) earnings increase resulting from cost-cutting efforts.
Global foldable smartphone sales are expected to reach about 18mn units (+40% y-y) in 2023 thanks to the launch of new models by Chinese companies and Android players such as Google and Samsung Electronics (SEC). As a supplier of protective films to almost all of the major foldable smartphone companies, related benefits continue to strengthen for the firm.
We push up our 2023 OP forecast by 29.1% to W27.1bn (+239.1% y-y), reflecting the expansion of the foldable smartphone market, improved glass stick yields, increased orders, and cost reductions. Even in the 1Q off-season, Segyung Hitech logged OP of W4.6bn (TTP y-y), indicating improved profit visibility.
Sales of new foldable smartphones to rise in 2H23
We note that the new foldable smartphone to be released by a domestic customer in 2H23 is equipped with dumbbell hinges (waterdrop hinges) that promise to eliminate screen wrinkles. In addition, the size of the front display on the flip model has been increased from 1.9 inches to 3.7 inches. In line, the smartphone’s design appeal and marketability should both improve significantly. Thanks to such innovations, in contrast to the previous lineup, we forecast strong sales for the new model.
Over the mid/long term, foldable form factors are likely to appear for other IT devices such as tablets in addition to smartphones. The possibility of adoption by a major North American firm is also positive for Segyung Hitech.