Eugene Investment & Securities on the 21st said RFHIC has ample momentum waiting in the wings and that the contribution from its subsidiary's results also warrants attention. It initiated coverage with a Buy rating and a target price of 120,000 won. RFHIC's previous closing price was 91,900 won.
Lee Chan-young, a researcher at Eugene Investment & Securities, said, "Considering in aggregate the expansion potential of the Chonbang market from wireless communications to defense, optical communications, and semiconductor equipment, and the increase in high-margin overseas defense orders, RFHIC's high valuation is justified."
In particular, there appear to be many events ahead that could serve as share-price catalysts. First, it noted that follow-on orders from Raytheon are expected, following approval of increased funding for the U.S. air traffic control system modernization program. It also said that the outcome of Ericsson's vendor selection, the export momentum at LIG Defense&Aerospace following entry into Cheongung-II, the wireless communications narrative, and the monetization momentum for equipment parts supplied to Applied Materials are all lined up within the year.
Results are forecast to see operating profit rise stepwise by quarter.
The researcher said, "Overseas defense will likely drive results, and Raytheon volumes will begin deliveries from late in the second quarter this year and continue through the third and fourth quarters," adding, "On top of that, the contribution from the subsidiary exposed to data center optical communications Chonbang will also expand."
In particular, even if growth in the wireless communications market Chonbang is weak, RFHIC has reduced its dependence on the wireless business cycle through portfolio diversification.
The researcher explained, "Even if wireless communications Chonbang growth is weak, if mass production for the new major customer Ericsson materializes, the communications institutional sector can grow through market share gains."