[Click eStock] "KH Vatec, Foldable Phones to Be a Variable After the Second Half"

1Q Moderate Performance... "Foldable Phone Component Production as Future Growth Engine"

[Asia Economy Reporter Minwoo Lee] KH Vatec posted a solid first quarter in line with expectations. The direction of foldable smartphones in the second half of the year is expected to determine this year's performance.

On the 19th, IBK Investment & Securities maintained a 'Buy' rating and a target price of 27,000 KRW for KH Vatec. This is based on the judgment that the growth engine is still effective as the company produces key components for foldable smartphones.

KH Vatec received a satisfactory report card for the first quarter of this year. Sales recorded 48.5 billion KRW, down 1.8% year-on-year, while operating profit turned positive at 1.9 billion KRW. Researcher Kim Unho explained, "This is not significantly different from previous forecasts," adding, "Operating profit decreased significantly compared to the previous quarter, but since the previous quarter's operating profit included gains from the liquidation of the Chinese subsidiary, there is no real change in the operating profit margin."

Since domestic customers' smartphone shipments have been sluggish, a downward revision of the full-year performance compared to previous forecasts seems inevitable. Nevertheless, sales of assembly modules are expected to continue increasing. Researcher Kim said, "One additional model is expected in the second half for assembly modules," and added, "Although 5G derivative models will be released from existing models, it will be difficult to exceed previous volumes." Sales from Internet Data Center (IDC) are expected to begin from the second quarter, but with annual sales around 10 billion KRW, the contribution is not expected to be significant.

Researcher Kim explained, "After a weak performance in the second quarter, normalization is expected in the second half," and added, "Since the company holds new growth engines through the production of key foldable components and provides solutions suitable for cost reduction of customers, it is judged to have secured additional growth momentum."

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