[Click eStock] "Innocean, Q2 Earnings Expected to Decline... Target Price Down"

[Asia Economy Reporter Eunmo Koo] Ebest Investment & Securities has lowered the target price of Innocean from 72,000 KRW to 64,000 KRW, citing weak performance expected in the second quarter of this year.

On the 2nd, analyst Hyunyong Kim of Ebest Investment & Securities estimated in a report that Innocean's gross profit for the second quarter of this year would decline by 3.4% year-on-year to 120.1 billion KRW, and operating profit would drop by 35.4% to 18.6 billion KRW, falling short of market expectations.

Analyst Kim explained, “The top line is expected to contract mainly due to non-affiliated sectors affected by the COVID-19 impact, but the decline will be limited due to the effect of the Welcom acquisition.” He added, “Profitability is likely to decrease by about 30% as major fixed costs, including labor costs, will largely be maintained despite the shrinkage in scale.” He forecasted that the recovery speed of earnings will accelerate from the third quarter, starting with the launch of the GV80 in the North American market, after the second quarter results hit the bottom. Furthermore, he anticipated, “Next year will see strong momentum continuing with the launch of new electric vehicle models based on dedicated platforms.”

Even after the Welcom acquisition, the captive ratio remains stable at 70%. Analyst Kim stated, “The Genesis brand’s global establishment and the new models on the electric vehicle dedicated platform will continuously require new marketing efforts.” He also noted, “At the end of the first quarter, net cash approached 600 billion KRW, accounting for more than 65% of the current market capitalization, which implies strong downside rigidity at the current stock price level.”

While maintaining a ‘Buy’ investment rating, the target price was lowered by 11% to 64,000 KRW. Analyst Kim explained, “The target price was lowered due to the downward revision of earnings forecasts by the same margin following this earnings downgrade.” However, he maintained the ‘Buy’ rating because “earnings and momentum are passing through the bottom phase, strong captive new car momentum is expected from the third quarter through the first half of next year, and the current stock price corresponds to a price-to-earnings ratio (PER) of 12 times, which is historically the lowest point.”

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