[Click e Stock] "EMTEK, Strong Growth in E-Cigarettes to Drive Full-Scale Growth Next Year"

[Asia Economy Reporter Song Hwajeong] Daishin Securities maintained a 'Buy' rating and a target price of 45,000 KRW for EMTEK on the 15th, forecasting that the company will show a full-fledged growth trend from next year due to the high growth of the electronic cigarette market.

Han Kyungrae, a researcher at Daishin Securities, said, "Considering the high growth potential of the electronic cigarette market and the resulting increase in scale and profits, the corporate value is expected to be re-evaluated in the mid to long term."

EMTEK's third-quarter performance this year met market expectations. On a consolidated basis for the third quarter, sales decreased by 1.2% year-on-year to 107.1 billion KRW, while operating profit increased by 11.9% to 10.1 billion KRW. The parts division recorded sales of 52.2 billion KRW and operating profit of 3.8 billion KRW, down 7.5% year-on-year, but the product division posted sales of 54.9 billion KRW, up 5.7%, and operating profit of 6.4 billion KRW, up 27.8%. Researcher Han analyzed, "The normalization of supply of microcontroller unit (MCU) semiconductor chips in the product division and the fixed cost leverage effect led to simultaneous improvements in sales and profit margins."

There is an opinion that the mid- to long-term growth potential is high due to the shift to electronic cigarettes. Favorable policies toward electronic cigarettes are expected to be a clear growth momentum. The UK Department of Health is reviewing a plan to allow doctors to prescribe electronic cigarettes, and the New Zealand government has eased regulations on electronic cigarettes, which have proven harm reduction effects, through the approval of the 'Smoke-free Environment and Regulated Products' bill, unlike general cigarette regulations. The U.S. Food and Drug Administration (FDA) also approved PMI's IQOS Modified Risk Tobacco Product (MRTP) last year. Along with this, global major tobacco companies such as Philip Morris and BAT are focusing investments on electronic cigarettes that help improve public health as part of their ESG (Environmental, Social, and Governance) management. Researcher Han said, "Since the demand aligns with stakeholders such as the government and major companies, high growth is possible in the mid to long term," adding, "EMTEK's 2022 sales are expected to increase by 30.3% year-on-year to 514.6 billion KRW, and operating profit is forecast to rise by 69.5% to 59.2 billion KRW. With the expansion of the product division's sales ratio, the operating profit margin is expected to increase by 2.7 percentage points to 11.5%."

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