[Click eStock] Sollid, Clear Earnings Improvement... Significant Growth Expected This Year

[Asia Economy Reporter Lee Seon-ae] Hana Financial Investment announced on the 15th that it maintains a buy rating and a target price of 15,000 KRW for Sollied. This is based on the judgment that not only will the company achieve an earnings surprise in the fourth quarter, but also significant profit growth is certain this year. Accordingly, it was also presented as the top pick stock within the domestic network equipment sector.

Hong-sik Kim, a researcher at Hana Financial Investment, explained, "Considering the progress of orders, sales trends by key regions, and development cost issues, it is highly likely that profits in 2022 will reach a level higher than in 2021. Despite the improvement in earnings, the stock price increase has been minimal, so the price merit is high. The current low confidence in the earnings improvement of domestic 5G equipment stocks makes this the right time to buy."

A sharp increase in Sollied's profits is expected in 2022. Of course, if the ORAN development costs had been fully amortized last year, the profit increase in 2022 might have been even greater. However, considering recent corporate accounting trends, this is evaluated as an appropriate level.

The burden of increased costs in 2022 due to deferred amortization of development costs is not significant. This is because the amortization of O-RAN development costs is expected to continue until 2023. Although the margin rate may slightly decrease, projects such as the London subway construction and US DAS sales are businesses with high gross margin rates, and with the addition of O-RAN sales, the effect of fixed cost sharing is expected to be substantial.

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