Fine M-Tec’s Profit Leverage Rides the Foldable Boom, Accelerating Growth in the Fourth Quarter

[Financial News] MERITZ SECURITIES forecast that Fine M-Tec’s earnings growth will continue in the second half as strong sales of Samsung Electronics’ foldable devices are joined by initial foldable-device orders from a North American customer. Notably, the brokerage expects earnings to grow even in the fourth quarter, which is typically an off-season, potentially breaking the company’s established seasonal pattern.
On the 7th, MERITZ SECURITIES analyst Yang Seungsoo maintained a Buy recommendation on Fine M-Tec and raised the target price to 13,000 won.
Fine M-Tec’s consolidated revenue in the second quarter rose 118.5% year on year to 95.2 billion won, while operating profit reached 7.3 billion won, marking a return to profitability. Operating profit exceeded MERITZ SECURITIES’ estimate by 45.2%.
The key factor is profitability rather than revenue growth. Yang explained, "Higher shipments of backplates for domestic customers’ foldable devices and an increase in average selling prices (ASP) resulting from the adoption of laser etching were accompanied by improved yields as mass production stabilized." He added, "Profitability, which was weighed down by upfront research and development (R&D) costs last year, is returning to normal."
Third-quarter revenue is projected at 135.7 billion won, with operating profit estimated at 11.9 billion won. These figures represent year-on-year increases of 135.9% and 674.6%, respectively. While orders from domestic customers are expected to remain high on the success of Fold8, sales to the North American customer will also be reflected beginning in the third quarter.
The fourth quarter is the key period. Orders from the North American customer are expected to expand in earnest during the quarter because of yield issues elsewhere in the value chain. MERITZ SECURITIES estimates this year’s North American foldable shipments at 6.5 million units on a device basis and 8 million units on a panel basis. Accordingly, the brokerage believes additional quarter-on-quarter growth will be possible even in the typically slow fourth quarter.
Whether Fine M-Tec can expand its market share is another variable. As this is the North American customer’s first foldable device, quality stability will be important during initial mass production. If Fine M-Tec, which has secured a competitive edge in laser-etching quality over Chinese rivals, captures additional market share, its earnings estimates could be revised upward further.
Yang added, "Rather than focusing on the possibility of a short-term sell-on-news reaction, investors should pay attention to the foldable market’s medium- to long-term growth and the structural benefits it offers." He continued, "The fact that only a limited number of South Korean companies have secured meaningful market share in foldables for North American customers also enhances the investment appeal."
[email protected] Kim Kyung-ah Reporter