[Click eStock] "Innocean, Highlighting 'Stability + Undervaluation' Appeal"

[Asia Economy Reporter Park Ji-hwan] Daishin Securities maintained a 'Buy' investment rating on Innocean on the 23rd, stating that it is undervalued compared to its stability, and set a target price of 100,000 KRW.

Kim Hoe-jae, a researcher at Daishin Securities, said, "Compared to the early March forecast, due to the impact of COVID-19 causing a contraction in the real economy, the earnings for the first and second quarters have been revised downward compared to the previous forecast," adding, "Gross profit and operating profit are expected to increase by 13% (previously 23%) and 11% (22%), respectively, compared to the same period last year."

Advertising expenses basically consist of a mix of fixed costs that must be executed and variable costs linked to sales. There is also a tendency for these to be reflected about one to two quarters later than the real economy.

Researcher Kim explained, "If new products continue to be launched, even if the advertising budget decreases in the first half of the year, it will not disappear but will be deferred to the second half or next year." In particular, marketing volume from Hyundai Kia Motors, which accounts for about 70% of earnings, is expected to show favorable results thanks to new car launches and strong sales of models such as the GV80, G80, and Avante, despite partial factory shutdowns.

He evaluated, "Currently, Innocean holds 600 billion KRW in cash, and its market capitalization is 1.1 trillion KRW, making the market cap relative to cash the lowest ever," adding, "Considering that companies worldwide are striving to secure liquidity, Innocean is excessively undervalued compared to its cash holdings."

This content was produced with the assistance of AI translation services.