[Click e-Stock] BH Q2 Operating Profit Halved...Better Than Feared

In the second quarter of this year, BH's operating profit was halved compared to the same period last year, but the company still outperformed market expectations (consensus). This was because losses from IT OLED substrates for tablets and laptops were better than anticipated, and both domestic and overseas sales related to smartphones were solid.

On August 5, KB Securities maintained its 'Buy' investment rating on BH and raised its target price by 11.8% to 19,000 won. The previous day's closing price was 14,850 won. The increase in automotive OLED sales reduced the fixed cost burden for IT OLED, and the PCB industry remained more robust than feared, leading to expectations of further improvement in performance.

The second quarter results were better than initially feared. Revenue was 389.7 billion won, down 16.8% year-on-year, and operating profit was 16 billion won, a 48.8% decrease over the same period. Nevertheless, the company exceeded consensus, which was seen as a positive outcome.

The average KRW-USD exchange rate in the second quarter was 1,401 won, down 3.5% from the first quarter, which exerted downward pressure on performance. However, losses from IT OLED substrates improved more than expected due to increased utilization rates from the production of automotive display panel products. Additionally, sales to domestic clients, driven by strong shipments for foldable smartphones, and sales to the North American client Apple, which began shipping new products in the second half, both performed better than expected.

With the arrival of the seasonal peak, sales for Apple's flagship smartphone new products are expected to surge, leading to strong results in the third quarter.

KB Securities estimated BH's annual results for this year at 1.79 trillion won in revenue and 58 billion won in operating profit. Compared to the previous year, revenue is expected to increase by 2.0%, while operating profit is projected to decline by 33.9%. Lee Changmin, a researcher at KB Securities, stated, "While FPCB results for smartphones are solid, the operating rate for IT OLED lines remains low, so annual losses related to this segment are expected to reach 30 billion won. However, from next year, IT OLED performance is expected to turn profitable, and sales for foldable smartphones to the North American client are anticipated."

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