Global Foldable Smartphone Market Expanding
The author is an analyst of NH Investment & Securities. He can be reached at kyuha.lee@nhqv.com. -- Ed.
We upgrade our rating on Segyung Hitech to Buy and raise our TP, considering the company’s growth potential as an exclusive parts maker for foldable smartphones (protective films) and recent recovery in earnings visibility. Well-positioned to benefit from expansion of the global foldable smartphone market as well as the growth of domestic customers, Segyung Hitech represents an attractive investment vehicle.
Upgrade to Buy in consideration of foldable smartphone growth potential and recovery in earnings visibility
We upgrade our rating on Segyung Hitech from Hold to Buy and raise our TP from W19,000 to W39,000. The upward adjustments stem from: 1) a hike to our target P/E from 13.5x to 17.5x; 2) a change in valuation base year from 2021E to 2022F; and 3) a 27.2% boost to 2022F OP on an increase to our 2022 foldable smartphone shipment assumption for a major customer.
Thus far, we had adhered to a Hold rating mainly due to the firm’s limited earnings visibility following IPO. However, we expect the company to enter a period of full-fledged profit recovery from 3Q21 on the back of foldable smartphone shipment acceleration. We apply a similar target P/E to that for peers considering both the foldable smartphone market’s growth potential and Segyung Hitech’s monopolistic market position.
To benefit from expansion of global foldable smartphone market as well as growth of main domestic customer
In terms of earnings, Segyung Hitech is forecast to recover rapidly in 2022, with 2022 OP reaching W32.3bn (+100.9% y-y; OPM of 9.6%), up 27.2% from our previous estimate thanks to foldable smartphone shipment expansion at customers.
Although Segyung Hitech’s shares have performed solidly as of late thanks to brisk pre-orders for the Galaxy Z series, we believe there is room for further upside. It is expected that its main customer’s strategy of focusing on foldable smartphones (its only hit products at the moment) is to further solidify in the future. Chinese and North American firms are also expected to enter the market in earnest moving ahead.
In particular, as a parts vendor for domestic display panel makers, Segyung Hitech should enjoy exclusive supply of foldable smartphone-related parts to not only domestic smartphone makers but also Chinese firms from 2H21.