[Click eStock] "China's Recovery, Doosan Infracore 1Q Earnings Outlook 'Bright' Thanks to Bobcat's Strong Performance"

1Q Operating Profit 260.2 Billion KRW... 44% Increase YoY Expected

San Infra Core's newly launched 100-ton class excavator DX1000LC-7 model (Provided by Doosan Infracore) [Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] Doosan Infracore is expected to record earnings for the first quarter of this year that exceed market consensus. This is attributed to strong sales in emerging markets such as China and favorable performance by its subsidiary Doosan Bobcat.

On the 20th, KB Securities forecast that Doosan Infracore will achieve consolidated sales of 2.3441 trillion KRW and operating profit of 260.2 billion KRW in the first quarter of this year. This represents a 16.7% increase in sales and a 43.8% increase in operating profit compared to the same period last year. Both sales and operating profit are expected to surpass the consensus estimates (sales of 2.31 trillion KRW, operating profit of 237.5 billion KRW).

The strong performance in emerging markets was a key factor, especially rapid growth in the Chinese market. Dongik Jung, a researcher at KB Securities, stated, "Domestic excavator sales in China this year are expected to reach approximately 324,000 units, a 9.8% increase from last year," adding, "First quarter sales have already exceeded 114,000 units, and despite a high base last year, growth is expected to continue into the second quarter." Although a contraction is likely in the second half of the year, strong performance in the first half is expected to offset this. However, due to issues such as parts procurement, Doosan's market share is projected to decline from 6.9% last year to 6.5% this year.

The merger with Doosan Heavy Industries & Construction is not seen as a significant positive factor. Doosan Infracore plans to split into a business division and an investment division (holding Bobcat shares) as of July 1, and then merge the investment division with Doosan Heavy Industries & Construction. Although variables such as the scale of the purchase offer remain, if the plan proceeds as scheduled, Doosan Infracore shareholders will hold 31% in the business division and 69% in the investment division after the split. Researcher Jung commented, "Existing Doosan Infracore shareholders will effectively have purchased Doosan Heavy Industries & Construction at a 69% weighting," but added, "However, the stock price of Doosan Heavy Industries & Construction, based on last year's standalone performance, has a price-to-book ratio (PBR) of about 1.7, so there is limited valuation merit."

Against this backdrop, KB Securities raised Doosan Infracore's target price by 20% to 9,600 KRW. However, the investment opinion was maintained at 'Neutral (HOLD)' because the closing price on the previous day was 10,500 KRW, already exceeding the target price.

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