As RFHIC posted results exceeding market expectations, LS SECURITIES assessed on the 29th that additional orders are possible. RFHIC manufactures gallium nitride (GaN) transistors and power amplifiers used in wireless communications and defense industries.
RFHIC announced it recorded consolidated sales of 44.6 billion won and operating profit of 8.3 billion won in the second quarter (April-June) of this year. The sales are 6.4% higher than market forecasts, and operating profit is 66% higher.
Choi Jeong-hwan, a researcher at LS SECURITIES, pointed to direct exports in the defense sector as a reason for RFHIC’s "surprising performance." He noted, “I estimate that the revenue from direct exports overseas has been recognized, while the export volume through LIG Nex1 and domestic defense sales recognition continue.”
Researcher Choi explained that RFHIC is supplying GaN-based power amplifiers for radar and missile seekers of LIG Nex1, indicating that RFHIC is also growing in structure alongside LIG Nex1’s performance growth.
Researcher Choi added, “RFHIC stands to benefit from various missile projects such as the Cheongung upgrade project, L-SAM, LAMD, and ongoing exports to the Middle East and the Peru destroyer project, in which LIG Nex1 is involved as a systems integrator.”
Researcher Choi did not provide a separate investment opinion or target price for RFHIC. However, he mentioned that in terms of valuation, it is at a similar level to global comparison corporations.
He stated, “If we convert RFHIC’s semi-annual performance this year to an annual basis, the 12-month trailing price-to-earnings ratio (PER·market capitalization ÷ net profit) is 33.1 times, which is considered appropriate compared to global comparison corporations (33 times),” adding, “Generally, the defense industry tends to show a performance trend of higher earnings in the first half and lower in the second half, so I see 33.1 times as a conservative estimate.”