KB Securities on the 25th analyzed that the communication equipment sector operated by the compound semiconductor specialist RFHIC is improving, and defense sales are showing rapid growth. As a result, it raised the target price to 32,000 won and changed the investment opinion from the existing 'Hold' to 'Buy.' In the previous transaction, RFHIC closed at 23,300 won.

RFHIC defense radar. /Courtesy of RFHIC website capture

According to KB Securities, RFHIC's annual sales in 2025 are estimated to increase by 37% year-on-year to 157.7 billion won, with operating profit expected to rise by 1,156% to 19.2 billion won. This is a revision upward of 20% and 38% for sales and operating profit, respectively, compared to previous estimates.

Lee Chang-min, a researcher at KB Securities, noted, "As the long-standing sluggish sales of communication equipment are recovering, the revenue from the profitable defense institutional sector is continuously growing, indicating that the performance improvement trend is likely to continue for the time being." He added, "Given the favorable conditions in the front market (defense), the performance of RFHIC's power amplifiers used in radars and guided missiles is expected to have additional upward potential depending on future order trends."

As a result, the researcher raised both the target price and the investment opinion. He stated, "The reason for raising the target price is to reflect the improvement in the communication equipment sector and the steep growth in defense sales, raising the average expected return on equity from 7.3% to 10.7% for 2025-2034." He also mentioned, "The upward potential of the current stock price compared to the target price is 37%."

RFHIC's second-quarter sales this year are estimated to increase by 78% year-on-year to 46.4 billion won, and the operating profit is projected to switch to profitability at 5.8 billion won. The communication equipment sector's sales, which recorded 20.4 billion won in the first quarter, are also expected to remain solid at 15.7 billion won in the second quarter. Additionally, the domestic and overseas defense performance is expected to improve by 80% and 70%, respectively, compared to a year ago.

The researcher mentioned, "As the performance of all major business units shows strong trends, the quarterly operating profit margin is expected to record the second-highest level since the 2020s."