The author is an analyst for NH Investment & Securities. He can be reached at kyuha.lee@nhqv.com -- Ed.
Mid/long-term earnings growth should continue thanks to expanded application of deco film, the supply of foldable smartphone metal plates, and shipments of tablet OLED materials. Despite the recent share price rise, we believe there is high potential for further upside.
Earnings and TP raised on improved demand and product diversification
We raise our TP on Segyung Hitech from W7,000 to W9,000 and maintain a Buy rating, as we hike 2024F OP by 23.9% in consideration of product diversification and recovering client shipments. Despite the recent share price rise, we maintain a Buy rating, as the firm is still trading at an attractive 2024F P/E of 7.3x and its mid/long-term growth potential is high.
Earnings momentum should continue to build thanks to: 1) increased deco film shipments on a change in design for a domestic client’s flagship device to be released in 2025 and greater application of Oppo glass cases; 2) new supply of foldable smartphone metal plates; 3) shipments of tablet OLED OCA materials for two domestic customers.
Considering these factors, we hike 2024F sales and OP by 11.5% and 23.9%, respectively. In the mid/long term, further earnings growth is possible from foldable displays and expanded use of OLED panels.
4Q23 results to exceed our estimate
The firm’s 4Q23 OP is likely to beat our previous estimate, reaching W10.1bn (+470.8% y-y) thanks to cost reduction effects (such as factory automation), increased shipments of high-margin foldable smartphones in Greater China, and greater OLED shipments at display clients.
We expect Samsung Electronics and Chinese firms to see strong smartphone sales growth in 2024. Attractive mid/long-term factors include a recovery in demand for existing products such as decoration film, tape, and protective film for foldable smartphones, but also sales of metal plates and OLED for other IT devices. The company’s share price should rise thanks to its improved earnings performance.