[Click eStock] BH, Strong Tailwind for Second Half Earnings 'Target Price Raised'

Meritz Securities maintained a buy rating on BH and raised the target price to 38,000 KRW.

Yang Seung-su, a researcher at Meritz Securities, stated, "Despite high earnings visibility in the second half, the current BH stock price (12-month forward price-to-earnings ratio (PER) of 7.4x) is still trading below the past 5-year average (9.0x). Considering that the new growth driver, the automotive electronics business (BH EVS + battery FPCB), will turn profitable in the second half and that RF-PCB will expand to IT OLED in the first half of next year, further multiple expansion is possible. Therefore, we have raised earnings estimates and reflected an increased weighting for 2024."

BH's sales for the second quarter of this year are expected to reach 338 billion KRW, and operating profit 14.2 billion KRW, surpassing consensus by 1.1% and 7.2%, respectively. This improvement is attributed to increased supply volume to North American customers due to a temporary rise in legacy-oriented shipments compared to the previous quarter, and the start of supplying higher-margin foldable components to domestic customers. However, weaker long-tail demand compared to the previous model and costs related to normalizing the automotive wireless charging module (BH EVS) business make a year-on-year decline in performance inevitable.

As of the end of June, production of components for the new iPhone 15 has started this year, with initial volumes estimated to be higher than the previous model. This is largely due to Chinese display competitors facing difficulties in hole display processing, resulting in all initial volumes shifting to domestic customers. Considering that a full-scale patent litigation between domestic customers and Chinese competitors has begun, further market entry is expected to be limited.

Professional-grade volumes are also maintaining a high market share within customers, based on technological superiority, similar to last year. Given the expected high shipment volume of the iPhone 15 in the second half due to deferred and replacement demand, sales to North American customers in the second half are expected to be at a similar level to the previous model.

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