[Click e-Stock] "THN, From Automotive Nervous Systems to Robotics Electronics...Extremely Undervalued"

On May 26, independent research firm Research Areum analyzed that THN is raising the possibility of a revaluation based on its structural growth resulting from the proliferation of electric vehicles (EVs) and hybrid vehicles, as well as expectations for its entry into the robotics market. Accordingly, the firm presented a target share price of 22,500 won, which is 202% higher than the current price.

THN is a company specializing in the production of wiring harnesses, which are essential components connecting electric and electronic systems within automobiles. Its main clients are Hyundai Motor Company, Kia Corporation, and Hyundai Mobis, all affiliates of Hyundai Motor Group. The company supplies its products to high-end models such as the G70, Tucson, Santa Fe, Palisade, and EV9, with a focus on SUVs, hybrids, and electric vehicles.

Choi Seonghwan, a researcher at Research Areum, explained, "A wiring harness is an essential component that serves as the 'nervous system' of a car, delivering power and signals to various sensors, ECUs, batteries, lamps, and electronic devices in the vehicle." He added, "As the industry moves toward electric, hybrid, and autonomous vehicles, the number of electronic components in vehicles increases, which in turn drives up both the volume of wiring harnesses and their unit prices."

The expansion of the electric vehicle market, in particular, is considered a favorable environment for THN. It is known that electric vehicles require more than 50% higher usage of harnesses compared to internal combustion engine vehicles. With the spread of high-voltage systems, demand for high-voltage harnesses, junction blocks, and power distribution solutions is also rapidly increasing.

Recently, THN has been expanding its product portfolio with high-voltage harnesses, high-voltage junction blocks (HVJB), integrated control units (ICU), and high- and low-voltage conversion technologies, thereby accelerating its diversification into the automotive electronics sector. Its global supply chain, based on overseas production bases in Brazil, Paraguay, the Philippines, Vietnam, and China, is also regarded as a major strength.

The company's performance growth is also steep. Research Areum forecasts that THN's consolidated sales this year will reach 1.2063 trillion won, up 22% from last year, and that operating profit will increase by 23.4% to 86.5 billion won. The full-year reflection of the acquisition of the wiring harness business unit from JSN, which was executed last year at around 10 billion won, is also cited as a factor for improved performance this year.

Researcher Choi analyzed, "The company was able to improve profitability due to the economies of scale achieved by integrating production and sales capabilities, enhanced bargaining power in raw material purchasing, and the effects of reduced common expenses."

In fact, THN's share of wiring harness supply within Hyundai Motor Group increased from 12.8% in 2023 to 13.3% last year, and is expected to expand to 16.1% this year. The fact that the company's main supply models are high-end SUVs, hybrids, and electric vehicles is also seen as a reason for its higher profitability compared to competitors.

The market is also paying attention to the company's potential to expand beyond automobile electrification into the robotics sector. As Hyundai Motor Group is establishing mass production systems for humanoid robots such as 'Atlas' through Boston Dynamics, there is analysis suggesting that THN's automotive electronics technology could be extended to the robotics field.

Researcher Choi diagnosed, "Humanoid robots structurally require highly integrated electronic systems similar to vehicles. The company's core business, wiring harnesses, essentially serve as 'electronic nervous systems' that deliver power and data, which means there is a high degree of technical overlap with robotics."

He added, "Technologies related to electric vehicles, such as high-voltage harnesses, high-voltage junction blocks, and integrated control units, could in the future be extended to power distribution systems for robots, as well as sensor and motor interfaces, and battery connection structures."

The global market outlook is also positive. According to market research firm Fortune Business Insights, the automotive wiring harness market is expected to grow at a compound annual growth rate of 6.1% until 2032, driven by the proliferation of electric vehicles and software-defined vehicles (SDVs).

Nevertheless, there is analysis that the company's current valuation is excessively undervalued. Based on this year's projected performance, THN's price-to-earnings ratio (PER) is only around 1.7 times, which is significantly lower than the average for small and mid-sized auto parts companies.

Researcher Choi evaluated, "Considering the company's superior profit structure compared to competitors, as well as its potential for expansion into electrification and robotics, the current share price is located in a significantly discounted range."

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