Shinhan Investment Securities analyzed that Daesung Hi-Tech succeeded in diversifying its upstream industries, but the improvement of profitability in the future will be a key variable determining the direction of the stock price. They did not present an investment opinion or target stock price separately. The closing price of Daesung Hi-Tech on the previous trading day was 3,500 won.
As of the third quarter of this year, the separate basis sales by product were 29 billion won for precision parts, an increase of 3.8% compared to the previous year, 25.4 billion won for the Swissturn automatic lathe, an increase of 13.7%, and 7.4 billion won for the compact machining center, a decrease of 13.1%.
Operating profit decreased by 83.9% compared to the same period last year due to increased fixed cost burdens from the decrease in sales. Financial costs also rose, resulting in a net loss for the period.
Park Gwang-rae, a researcher at Shinhan Investment Securities, explained, “The sales of defense parts for precision parts are increasing more slowly than expected due to transportation disruptions in the export process, and the Swissturn automatic lathe and compact machining center are directly affected by the U.S.-China trade conflict and unstable international circumstances.”
Shinhan Investment Securities projected that growth in the precision parts sector will drive up Daesung Hi-Tech's sales. Researcher Park stated, “While sustained increases in overseas defense parts sales are expected, domestic defense sales will likely start next year.” The stagnation in sales for the Swissturn automatic lathe and compact machining center seems likely to continue for the time being.
The price-to-book ratio (PBR - market capitalization ÷ net worth) is also low at 0.6 times, but Shinhan Investment Securities pointed out that it is still a challenging period to mention valuation attractiveness due to low profitability. Researcher Park noted, “Monitoring is necessary to see how much domestic defense sales in precision parts will actually occur next year.”