The author is an analyst for NH Investment & Securities. He can be reached at kyuha.lee@nhqv.com -- Ed.
We lower our earnings outlook and TP considering slowing OLED TV demand and a declining market share. However, as customer order volume is likely to improve and market share recovery is expected in 1H24, we believe that it is an opportune time to buy at a low price, noting the firm’s appealing valuations.
Lower TP given declining earnings and falling valuations
We lower our target P/E from 19x to 15x and our TP from W55,000 to W43,000 to reflect a decline in earnings due to a slowdown in TV demand and a fall in market share for packaging materials, and the lower valuations of peer display materials makers. But, we maintain a Buy rating on Innox AMC amid expectations for customer order volume growth and market share recovery.
Performance to improve in earnest in 1H24
Amid slowing downstream demand and falling market share, 3Q23 OP is expected to drop to W15bn (-45.4% y-y), missing our previous estimate and consensus. However, the firm’s earnings should improve in earnest from 1H24, as: 1) customers’ OLED TV sales are likely to expand; and 2) its market share is expected to recover following the completion of the sale of a competitor’s business unit.
Considering valuation, buy is valid from mid/long-term perspective
The stock is currently trading at a 2024F P/E of 11.2x, which is at the bottom of its historical valuation. As the company’s performance improves and its customers’ OLED TV volume improvement becomes more visible in 1Q24, a share price recovery is likely to begin in earnest. We believe that the stock is a valid buy from a mid/long-term perspective.