KMU Receiving All the 5G Expectations

Foreigners and Institutions Net Buy 34 Billion Won Worth Since the Beginning of This Month

[Asia Economy Reporter Minji Lee] As expectations for increased investment in domestic and international 5G infrastructure grow, KMw has shown a stock price increase of over 10% since the beginning of this month, after a sluggish stock performance in the first half of the year. It has been among the most purchased stocks by foreigners and institutions, and the securities industry is raising its outlook, anticipating record-high earnings.

According to the Korea Exchange on the 10th, KMw's stock price rose 9.8% from the beginning of this month until the previous day. On the 8th, it reached an intraday high of 89,500 KRW, setting a new 52-week high. This marks a surge of about 133% compared to the March low (38,350 KRW).

In the first half of the year, KMw was spotlighted as a beneficiary of the 5G sector amid the spread of COVID-19, but its stock price movement was contrary to expectations. Although there was anticipation of expanded 5G investment in overseas markets, the first half earnings actually decreased compared to last year. The delay in investments due to COVID-19 was also reflected. The stock price stagnated in the 60,000 to 70,000 KRW range until last month, as it was largely ignored by foreigners and institutions for a long period.

However, as the increase in 5G equipment supply became visible, KMw has started its stock price rally this month. Buying by major market players has also continued. From September 1 to 9 in the KOSDAQ market, foreign and institutional investors net purchased 20.2 billion KRW and 13.8 billion KRW respectively, acquiring a total of 34 billion KRW worth of shares over seven trading days. It was the most net purchased stock in the KOSDAQ market.

Full-scale orders are expected to begin from the end of the third quarter, when the U.S. mid-band (3.5GHz) auction process concludes. Major telecom companies, including Dish Network, have already announced active plans to build 5G networks. Coupled with Japan’s investment cycle, equipment suppliers are expected to expand their order volumes in the global market through the fourth quarter.

Concerns about earnings are also expected to significantly decrease. Assuming order results are reflected in the fourth quarter, the market expects record-high earnings. According to financial information provider FnGuide, the market consensus for KMw’s quarterly revenue is 329.1 billion KRW, and operating profit is 71.1 billion KRW. This means the company would earn more than twice the operating profit of the first half (28.6 billion KRW) during the fourth quarter alone. Next year’s estimated revenue and operating profit are projected at 1.0938 trillion KRW and 228.8 billion KRW respectively, representing increases of 55% and 88% compared to this year.

The government’s push for the Digital New Deal policy is also stimulating the stock price rise. Since a complete 5G transition is expected to evolve into IoT (Internet of Things), telecom companies are anticipated to make long-term investments to secure related revenues. Hong-sik Kim, a researcher at Hana Financial Investment, explained, "5G was designed with the purpose of wirelessly implementing all objects, and domestic telecom companies, which have a relatively favorable environment, are accelerating their steps toward full IoT implementation. In fact, KMw is the biggest beneficiary of the Digital New Deal policy."

The securities industry is raising its price targets for the company. There are even forecasts that the stock price could surpass 100,000 KRW within this year. Hanwha Investment & Securities and Ebest Investment & Securities have raised their target prices by 43% and 60% respectively from previous levels. Eugene Investment & Securities upgraded its investment opinion from neutral to buy and raised its target price by 22%. Jong-sun Park, a researcher at Eugene Investment & Securities, stated, "With growing expectations for expanded investment in domestic and international 5G infrastructure, we believe the stock price will shift to an upward trend along with earnings recovery."

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