[Click eStock] "Youngone Corporation, Q2 OEM and Brand Businesses Both Unavoidably Affected by COVID-19"

[Asia Economy Reporter Koo Eun-mo] Hanwha Investment & Securities forecasts that Youngone Corporation will post poor results in both its main businesses, Original Equipment Manufacturing (OEM) and brand business, in the second quarter of this year due to the impact of the novel coronavirus disease (COVID-19). The poor performance is expected to continue through the third quarter.

According to Hanwha Investment & Securities on the 17th, Youngone is inevitably hit by external environmental factors in the second quarter, with consolidated sales estimated to decrease by 19.5% year-on-year to 539.6 billion KRW, and operating profit expected to drop by 54.6% to 41 billion KRW.

Both the core OEM business and the brand business are expected to perform poorly as the impact of COVID-19 intensifies. Researcher Son Hyo-joo of Hanwha Investment & Securities stated in a report on the same day, “First, the OEM business is expected to see sales decline by 30% in dollar terms, and with the KRW-USD exchange rate rising by 4.6%, sales in Korean won are projected to fall by 26.8% to 557.1 billion KRW.” He added, “As buyers’ order volumes sharply decreased and Bangladesh, a major production country, went into lockdown in April, the burden of fixed costs likely increased.” Operating profit is estimated to decrease by 67.0% to 22.3 billion KRW. The brand business is expected to see sales shrink by 10% to 248.2 billion KRW, with operating profit falling by 12.4% to 17.4 billion KRW.

It is analyzed that the OEM business will inevitably suffer damage for the time being. Researcher Son said, “The impact of COVID-19, which has spread worldwide since early this year, appears to be lasting longer than expected, so performance damage is unavoidable for the time being,” and forecasted, “A downward revision of performance estimates for the second half of the year is inevitable.” However, the bike brand ‘Scott’ business is estimated to be showing favorable results following the lifting of lockdowns in Europe, and is expected to show signs of recovery starting in the third quarter.

For performance recovery, it is ultimately necessary for the main OEM business to recover. Researcher Son predicted, “Small and medium-sized companies are more vulnerable in the recent crisis situation,” and added, “As a large OEM company, Youngone could see performance recovery if the crisis passes, due to order consolidation phenomena where order volumes concentrate on large companies.”

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