[Click eStock] "Patron, The Bottom Has Passed"

[Asia Economy Reporter Kwon Jaehee] Hi Investment & Securities maintained its 'Buy' rating on Patron on the 31st but lowered the target price from 18,000 KRW to 11,500 KRW.

Patron's estimated Q3 performance this year is sales of 312.9 billion KRW and operating profit of 10.1 billion KRW. This represents a decline of 13.9% and 61.6%, respectively, compared to the same period last year. Smartphone production by client companies is expected to improve starting in September. Although demand remains weak and inventory adjustments continue, the intensity is expected to gradually ease from Q2 onward.

The investment point is that the new business sector is steadily expanding. Combined sales of automotive parts and sensors are expected to grow from 284.8 billion KRW last year to 385.4 billion KRW this year and 449.5 billion KRW in 2023. During the same period, their share of total company sales is expanding from 22% to 30% and 33%.

Automotive parts account for a small portion of total sales but have high growth potential. Related sales were only 40 billion KRW in 2020 but are expected to grow to 105 billion KRW in 2022 and 160 billion KRW in 2023. The order backlog is rapidly expanding, and developments such as vehicle fingerprint sensors and air pressure sensors are underway, indicating an expansion of core competencies from the mobile business to the automotive sector.

In sensors, mobile fingerprint sensors are sluggish, but the lineup is diversifying with wearable heart rate sensors and temperature sensors. Related sales are expected to grow from 197.1 billion KRW in 2021 to 214.1 billion KRW in 2022. The average operating profit margin of sensors is higher than that of modules, which is expected to lead to overall profitability improvement.

Go Euiyoung, a researcher at Hi Investment & Securities, analyzed, "Although momentum is lacking, further declines will be limited," and added, "Although recent demand weakness is severe, client companies' set production is expected to gradually improve starting in September."

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