[Hidden Market Picks] Daechang Forging: Stable growth expected to continue in 2018

2018.01.09 15:57:27 | 2018.01.10 15:13:57

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Daechang Forging Co.(Kospi: 015230), a South Korean construction equipment and auto parts maker, is expected to extend stable earnings growth this year on increased orders from major global customers and higher raw materials price.

For full 2018, its operating profit is estimated to jump 16.2 percent on year to 2.2 billion won ($2.1 million) on a consolidated basis. Sales are expected to expand 15 percent on year to 295.6 billion won, according to a recent report by eBest Investment & Securities.

The company exports its products including construction vehicle parts and auto engine parts to more than 50 countries across the world and direct sales comprise nearly 40 percent of its total export. Its client portfolio is well-balanced with a quarter of total sales coming from Volvo Construction Equipment Korea and 10 percent from Hyundai Construction Equipment, Doosan Infracore, and Tata Hitachi Construction Machinery, respectively.

Having been steadily increasing its share in supply to its core customers Volvo Construction Equipment Korea and Tata Hitachi Construction Machinery, Daechang Forging is expected to further improve its earnings this year. A steady growth in the global excavator market is another positive factor for Daechang Forging.

The company is also projected to benefit from the expected rise in prices of raw materials such as carbon steel and alloy steel, which should be translated into higher sale price of the company’s products.

There are three affiliates operating under Daechang Forging, carrying out wholesale and retail sales, parts assembly jobs, and metal molding process.

eBest Investment & Securities maintains its price target on Daechang Forging at 78,000 won and advises to invest for the mid-to-long term. Daechang Forging shares finished Tuesday at 58,400 won, unchanged from the previous trading session.

For more information, please contact Lee Ju-hong, analyst at eBest Investment & Securities, by phone at 82-2-3779-8921 or by email at juhong@ebestsec.co.kr.

You can also visit Financial Supervisory Service (http://englishdart.fss.or.kr/) for company details and latest quarterly report (search code: Daechang Forging or 015230). For latest trading data, please visit Korea Exchange (http://englishdart.fss.or.kr/) and search under DaechangForging or A015230.

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