[Click eStock] RFHIC, Orders Turning into Earnings "Only Stock Price Increase Remains"

[Asia Economy Reporter Lee Seon-ae] Hana Securities announced on the 29th that it maintains a buy rating and a 12-month target price of 60,000 KRW for RFHIC, designating it as the top pick within the network equipment sector.

▲ Although there was a 1-2 month delay compared to initial expectations, order achievements and sales performance since July have been progressing well, ▲ normalization of profits is expected in Q3 due to benefits from the U.S. market, with a sharp profit increase anticipated in Q4, and ▲ in 2023, when sales normalization will be in full swing, all the initially expected results for this year are expected to be realized, leading to the highest-ever performance.

Kim Hong-sik, a researcher at Hana Securities, emphasized, "Despite recent U.S. order achievements, the stock price has not reacted significantly, but with the improvement in the 5G equipment market and gradually rising earnings expectations, we believe the stock price will gain upward momentum."

RFHIC recorded weak results in Q2 2022 with consolidated sales of 23.7 billion KRW (a 21% decrease year-on-year) and an operating loss of 400 million KRW (turning to a deficit). The biggest cause was the delay of the U.S. P/O (purchase order) by about 1-2 months, pushing sales expected in June to August. However, the operating loss narrowed and net profit turned positive, mainly due to a reduction in overall operating expenses rather than sales. Although investors' earnings expectations are low, the outlook for RFHIC's performance in the second half is bright. Q3 is expected to be the first quarter showing earnings normalization, and Q4 is anticipated to demonstrate remarkable profit growth. This is based on the current order status and raw material supply situation. Exports of RHIC's GAN TR for the U.S. Dish Network through Samsung have already started. From August, Verizon's C-band volume is expected to be added. Achieving sales of 30 billion KRW in Q3 2022 and over 40 billion KRW in Q4 seems feasible.

Recently, investment sentiment toward RFHIC has deteriorated significantly because earnings have not met expectations. However, orders are ultimately expected to translate into earnings. Although delayed, the long-awaited U.S. Dish Network order was secured in July, with a single P/O worth 6.7 billion KRW and weekly P/Os continuing to come in. Considering this, total exports to Verizon and Dish in the U.S. in the second half are expected to reach 40 billion KRW. Although the 28GHz frequency band has been left unused, lowering investment expectations after the frequency auction, frequency auctions have historically led to equipment investments over the past 20 years. It is important to note that from July 2022 to 2023, the available frequency bands for U.S. telecom companies in the 3.5GHz/3.7GHz bands will significantly increase.

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