[Click eStock] "Sanil Electric Expected to Maintain Strong Performance in Q1... Still Undervalued"

On April 9, LS Securities projected that Sanil Electric would continue its strong growth in the first quarter of this year and deliver results largely in line with market expectations. However, the firm analyzed that despite solid fundamentals, the company's valuation remains undervalued.

Sung Jonghwa, a researcher at LS Securities, stated, “For the first quarter this year, operating results are expected to be sales of 143.3 billion won (up 45% year-on-year), operating profit of 51 billion won (up 36% year-on-year), and an operating margin of 35.6% (down 2.4 percentage points year-on-year), continuing last year’s strong performance and matching our previous forecasts.” He evaluated that the company continues to post significant growth compared to a year earlier, with results not deviating much from previous estimates.

However, compared to the previous quarter, some slowdown is expected. Researcher Sung mentioned, “The previous quarter included a one-off operating profit of 6.9 billion won (recovery of written-off accounts receivable), which creates a base effect, and there is also a base effect from incentive expenses of approximately 5 billion won,” adding, “Operating profit is expected to decrease slightly compared to 52.4 billion won in the previous quarter.”

Compared to market expectations, sales are projected to be generally in line, but profits may fall slightly short. He analyzed, “Relative to consensus forecasts, sales are expected to meet expectations, but operating profit is likely to miss slightly,” and added, “Consensus has not fully factored in the reversal of the previous quarter’s one-off operating profit.”

The main drivers of growth are the renewable energy and special transformer divisions. Sung forecasted, “First-quarter consolidated sales are expected to increase by 45% year-on-year, with the renewable/special transformer division up 95% year-on-year and the power grid division down 6% year-on-year.” He emphasized, “In the first quarter, the outstanding high growth of the renewable/special transformer division is expected to lead overall growth.”

The change in business structure is also evident. While the existing power grid division’s growth has slowed, the renewable energy and special transformer businesses are expanding rapidly. He explained, “The power grid division, which had been seeing high growth due to Pad transformers, has experienced a significant slowdown in growth, particularly in the North American market. In contrast, the renewable/special transformer division has seen explosive recovery, driven by a strong turnaround in the North American data center BESS sector.”

Despite such superior performance and growth potential, it was pointed out that the share price does not fully reflect these factors. Researcher Sung analyzed, “Even though a significant premium should be applied to the company’s multiples given its overwhelming advantage in fundamental indicators, the stock is actually trading at a considerable discount.”

He continued, “Compared to global peers, Sanil Electric shows overwhelming superiority in sales growth, profitability, and the speed of profitability improvement,” and positively assessed that “the completion of the sale of a 10% block deal by the second-largest shareholder has resolved uncertainty.”

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