[Click eStock] "Innowireless, Undervalued Company with PBR Below 1"

Hana Securities analyzed on the 15th that Innowireless is an undervalued company with a price-to-book ratio (PBR) below 1. The investment opinion was maintained as 'Buy,' but the target price was lowered to 47,000 KRW.

Kim Hong-sik, a researcher at Hana Securities, said, "The reason for lowering the target price is largely due to the recent weakness in the domestic telecommunications equipment sector stock prices, which significantly lowered the multiples, resulting in a more realistic target price." He added, "However, we still present a 'Buy' investment opinion on Innowireless and recommend a more aggressive buying stance compared to before as part of the investment strategy."

He stated, "Despite meaningful profit achievements from 2019 to 2023 and a high likelihood of maintaining an operating profit surplus in 2024, the PBR has dropped to 0.8 times." He continued, "A clear performance recovery is expected in the second half of the year, and with a sharp profit increase in the fourth quarter, an annual operating profit surplus is anticipated in 2024."

He emphasized, "Considering that the domestic frequency auction is scheduled for the fall of 2025, investor interest in Innowireless is expected to increase in 2025, which is likely to lead to a normalization of the multiples."

Hana Securities forecasted that Innowireless will record sales of 43.4 billion KRW and an operating profit of 100 million KRW in the third quarter. Compared to the same period last year, sales are expected to increase by 68%, and operating profit will turn positive.

He explained, "Although sales of test equipment and small cells in the telecommunications sector are expected to remain sluggish, the effect of increased sales from the acquisition of Myungseong Lifix and the completion of increased initial costs from mergers and acquisitions (M&A) will lead to improved performance compared to the previous quarter." He added, "Although minimal, a positive turnaround in consolidated operating profit is expected."

In particular, a remarkable performance improvement is expected in the fourth quarter of this year. He said, "This is because sales of the core small cell business are expected to expand to North America along with the normalization of exports to Japan." He emphasized, "Additionally, defense sales will expand due to seasonal effects, and consolidated operating profit in the fourth quarter of 2024 is expected to grow by 18% compared to the strong performance in the fourth quarter of 2023, reaching 9.7 billion KRW."

He stated, "The domestic frequency auction will take place in the fall of 2025, and CAPEX for the new frequencies will be executed from the end of 2025, but I believe Innowireless's stock price has fallen too much." He explained, "Considering the performance trend and upcoming events, this is an excellent buying opportunity at present, and there will not be many buying opportunities below a PBR of 1."

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