[Click eStock] "Sollem Stable Growth Next Year... Target Price Up"

Continued ESL Growth Next Year
Power Module Applications Also Expanding in Full Swing

Kiwoom Securities raised the target price for SoluM to 42,000 KRW on the 22nd, stating that "the company showed strong growth in the third quarter this year, and stable growth is expected next year as well." The buy rating was also maintained.

On the same day, Oh Hyunjin, a researcher at Kiwoom Securities, said, "SoluM's accumulated operating profit for the third quarter reached 139.6 billion KRW, growing significantly by 137% compared to last year. In addition to the electronic shelf label (ESL) segment, which led the performance growth in the first half, the profitability of the electronic components segment improved in the third quarter through production automation and cost management.

For the fourth quarter, sales are expected to increase by 11% year-on-year to 461.2 billion KRW, and operating profit is forecasted to rise by 12% to 18.6 billion KRW. Researcher Oh said, "This is a conservative estimate reflecting the delivery schedule of the main product group ESL and the usual year-end expenses," adding, "although there is no short-term performance momentum, it is necessary to focus on next year's growth due to the solid ESL order backlog of about 1.6 trillion KRW as of the end of the third quarter and the profitability improvement across all business segments."

He continued, "Although there are concerns about a 'peak followed by a decline' due to the steep growth in the ESL segment this year, attention should be paid to the still low ESL penetration rate in the retail market and the increasing presence in the ESL market," adding, "Various retail companies are scheduled to invest in ESL in the first quarter of next year. The active adoption by large companies will increase the ESL adoption rate among small and medium-sized companies."

With stable product competitiveness through direct manufacturing, market share is on the rise. The power module segment is expected to begin significant growth through server power modules and electric vehicle (EV) fast charger power modules. Although the sales scale of server power modules is not large, high growth is expected due to data center expansions. The EV charger power modules plan to sequentially mass-produce 30㎾ and 50㎾ models, which are expected to contribute significantly to performance starting from the first quarter of next year.

This year’s operating profit is expected to reach 158.2 billion KRW, a 109% increase compared to last year, and next year it is forecasted to increase by 10% to 174.6 billion KRW. Researcher Oh said, "Despite the absence of short-term performance momentum due to delivery schedules, the stock price has fallen more than 10% from its peak despite solid performance trends," adding, "the current price-to-earnings ratio (PER) based on next year is below 10 times. Considering the expansion of the power module’s downstream industries and the growth potential of the ESL segment, the stock is currently undervalued."

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