Healthy Growth Continues on Customer Diversification
The author is an analyst of NH Investment & Securities. He can be reached at soohong.cho@nhqv.com. -- Ed.
Amid a favorable new order trend, Mando is enjoying ongoing sound growth thanks to client diversification/product advancement efforts. Moving ahead, we expect that profitability improvement secured via last year’s restructuring and the acquisition of Mando Hella will offset rising raw material cost.
Healthy growth continues on customer diversification
We maintain a Buy rating and TP of W77,000 on Mando. Although short-term uncertainties are in play on the supply side, such as automotive semiconductor supply issues, the firm’s prospects for mid/long-term business scalability look solid, thanks to smooth progress in customer diversification and product advancement. Mando’s new order trend (non-HMG orders and an expanded portion of automotive component orders) for 2Q21 also looks favorable.
Business restructuring (split-off of advanced driver assistance system (ADAS) division; Sep 1) is in progress. Such efforts are aimed at promoting enhanced professionalism and optimized mid/long-term business operations by separating the chassis business, for which product characteristics and business requirements are rapidly changing, and the ADAS business.
2Q21 review: Beats consensus; new orders show positive growth
Mando reported 2Q21 sales of W1.49tn (+46.8% y-y) and OP of W76.7bn (TTP y-y; OPM of 5.2%), with OP beating both our estimate and consensus.
Despite production disruptions due to supply issues for automotive semiconductors, the firm booked healthy 2Q21 earnings thanks to: 1) an improving product mix; 2) greater global production for major North
American EV customers; and 3) cost improvement effects from the 1Q21 completion of stake acquisition in Mando Hella (electronic component JV, 100% consolidated). Meanwhile, looking at pre-tax profit, about W36bn of one-off gains (valuation gains on investment in startups) was reflected.
In 2Q21, ADAS sales came to W192.6bn (+25.5% y-y), with the related sales portion increasing q-q to 12.9% (vs 12.5%). In 2Q21, new orders amounted to W3.9tn. Among them, xEV-related products accounted for 56%, and non-HMG orders made up 65%. Product/customer diversification looks to be progressing smoothly. For 1H21, new order amount totaled W6.8tn, or about 82% of the annual target (W8.3tn).