[Click e-Stock] "Fine M Tech Secures Simultaneous Momentum in Korea and North America... Still Undervalued, Target Price Up 73%"

On August 29, Hyundai Motor Securities announced that Fine M Tech is securing simultaneous growth momentum in both the domestic and North American markets, raising its target price by 73% from 9,500 won to 16,500 won.

Kim Jongbae, a researcher at Hyundai Motor Securities, stated, "Fine M Tech's backplate performance is passing its trough," adding, "The yield rate for domestically supplied backplates is improving, and from next year, not only will the foldable set segment grow, but its market share is also expected to increase." He further noted, "With the entry into the North American foldable series, next year's performance is expected to improve significantly."

The company’s second-quarter results exceeded market concerns. Fine M Tech recorded sales of 76.5 billion won in the second quarter, a 51% decrease year-on-year, but operating profit increased by 17% to 5.3 billion won, achieving an operating margin (OPM) of 6.9%. Kim explained, "Last year's low yield rate in CFRP has improved to some extent, and with the exclusion of one-off expenses that were reflected last year, profitability has normalized."

Third-quarter results are expected to reach sales of 69.2 billion won and operating profit of 3.5 billion won (OPM 5.0%). He commented, "While sales of foldable sets are strong, there is still pressure to lower prices," and predicted, "Market share is likely to decrease slightly this year compared to last year, but from next year, the domestic set market share will rise again."

In particular, he said, "The company can respond to customer demands for process conversion, which allows for additional volume acquisition. From next year, with the launch of foldables in North America, the foldable market will expand, and domestic set manufacturers will also benefit as a result."

For North American backplates, it is expected that the company can secure volumes exceeding previous estimates. Kim stated, "The main reasons for the upward revision in estimates are the increased overall demand forecast for backplates and revised assumptions about market share," adding, "The demand forecast for North American foldable smartphones is around 6 to 8 million units, but this reflects excessive concerns about demand contraction."

He continued, "Considering new demand for new form factors and the cannibalization of existing top-tier lineups, the lifecycle-based volume is expected to be around 10 million units. For components like backplates, it is expected that more than 30% of the set volume will be secured to ensure initial yield, after-sales service volume, and inventory."

He also said, "Based on stable supply capabilities and technological superiority over competitors, the company will secure more volume than its rivals," and projected, "There will be significant upside in North America next year."

The stock price trend is also positive. Kim noted, "Driven by strong foldable set sales to domestic clients and expectations of entering the North American foldable supply chain, the company’s stock price has risen 85% from the early July peak." However, he assessed, "Considering the expansion of domestic market share next year and the volume secured from new North American clients, the stock remains undervalued."