Daelim Industrial (000210)

KOREA
January 24, 2014 Company Earnings Review
Daelim Industrial (000210)
BUY ( maintain )
4Q13 Earnings Review
Emily Kim Analyst / Construction, Utilities
82-2-6114-2935 [email protected]
Pankeun Park RA
82-2-6114-2939 [email protected]
Current price (Jan 23)
Turned to red with expansion in losses from Saudi Arabia and Kuwait projects
KRW 84,200
Fair value
Additional provisioning of KRW132.3bn booked for expected losses in 4Q13
KRW 105,000
Present 2014 guidance: new orders worth KRW9.5tr and OP of KRW365.7bn
(prev. KRW120,000)
Preference level within sector
Lowered fair value to KRW 105,000, but maintain BUY as preferred stock
★★☆
Fig 1: 4Q13 earnings result summary (K-IFRS consolidated)
Growth (%)
HRC
Market
%YoY %QoQ
est.
cons.
4Q13P
(KRWbn)
OR
2,439.3
(18.9)
0.9
2,678.0
2,812.1
OP
(319.6)
TR
TR
69.6
108.1
EBT
(390.5)
TR
TR
39.6
82.6
NP
(298.5)
TR
TR
30.8
61.7
Source: Hyundai Securities
Revised
2013F
9,846.9
39.6
(13.6)
(10.2)
(357)
%Change
2014F
10,174.7
345.5
440.3
330.2
8,165
2013F
(2.4)
(90.8)
TR
TR
TR
2014F
(4.1)
(34.7)
(29.3)
(29.3)
(29.3)
Source: Hyundai Securities
2,000
1,800
1,600
1,400
1,200
1,000
BD
HDPE
PP
1,831
1,541
1,391
1,155
1Q13
2Q13
3Q13
Daelim Industrial is targeting new orders worth KRW9.5tr,
including overseas orders worth KRW6.7tr, OR of KRW 10.1tr,
and OP of KRW 365.7bn in 2014. We lowered our 2014 earnings
forecasts considering that labor and material costs are rising due
to the recent employment expansion policy in Saudi Arabia
(Saudization), rather than to heated order competition in the
Middle East. It will be some time before full-fledged
improvement in the company’s performance can be expected.
Fair value of KRW105,000; Maintain BUY as a preferred
stock
Fig 3: Petrochem product price trend
USD/MT
Consolidated 4Q13 OR came in at KRW2.44tr (down 18.9%YoY),
OP at KRW-319.6bn (turned to red YoY), and NP at KRW-298.5bn
(turned to red YoY). The deficit relating to DSA (Daelim Saudi
Arabia), which has continued since 2Q13, grew significantly due
to increased losses stemming from the Saudi Arabia and Kuwait
low-margin plants. Daelim Industrial booked additional
provisioning of KRW132.3bn for expected losses in Saudi Arabia
and Kuwait in 4Q13.
2014 guidance: New orders worth KRW9.5tr and
OP of KRW365.7bn
Fig 2: Adjusted earnings estimates
(KRWbn)
OR
OP
EBT
NP
EPS (KRW)
Turned to red with expanded losses from Saudi
Arabia and Kuwait projects
4Q13P
Source: Hyundai Securities
For explanations of equity research ratings and disclosures,
please refer to the compliance section at the end of this report.Ԩ
While DSA (Daelim Saudi Arabia) looks to increase capital by
issuing new stocks, it would be difficult to determine the size of
capital increase. Given such uncertainties, we lowered the fair
value to KRW105,000 based on a PBR of 0.8x (previously 0.9x).
Earnings expectations should be lowered for the time being, but
given that the OP margin may normalize to the 5% level in 2015,
the stock offers high valuation merits. We maintain BUY for
Daelim Industrial as our preferred stock.
>> Daelim Industrial
FY-end
12/11A
12/12A
12/13F
12/14F
12/15F
(Reporting standard)
(IFRS-C)
(IFRS-C)
(IFRS-C)
(IFRS-C)
(IFRS-C)
OR (KRWbn)
7,988.1
10,253.3
9,846.9
10,174.7
11,084.6
OP (KRWbn)
437.5
486.1
39.6
345.5
588.1
NP (KRWbn)
379.8
400.8
(10.2)
330.2
486.3
Parent NP (KRWbn)
365.7
391.1
(13.8)
315.2
464.2
EPS (KRW)
9,473
10,133
(357)
8,165
12,025
Adj. EPS (KRW)
9,473
10,133
(357)
8,165
12,025
15.0 - 7.3
13.0 - 6.6
NA
10.3
7.0
PER* (x)
PBR (x)
0.8
0.7
0.8
0.6
0.6
EV/EBITDA (x)
7.5
5.2
32.2
7.0
3.9
Div. Yield (%)
0.1
0.6
0.2
0.2
0.2
ROE (%)
8.3
8.5
(0.3)
6.4
8.8
ROIC (%)
6.4
11.1
(0.1)
8.6
14.2
Note: IFRS-C = Consolidated financial statements; IFRS-P = Individual financial statements
Source: Company data, Hyundai Securities
Disclosures
ԨRating and Fair Value ChangesԨԨ
Ԩ
KRW
Ԩ
Daelim Industrial
Rating
4
180,000
160,000
3
140,000
120,000
2
100,000
1
80,000
60,000
12/1
13/1
0
14/1
Ԩ
Ԩ
Company
Date
Rating
Daelim Industrial
12/2/2
BUY
Fair value (KRW)
150,000
12/4/15
BUY
160,000
12/9/19
BUY
130,000
12/11/2
BUY
100,000
12/11/27
BUY
90,000
13/1/29
BUY
100,000
13/4/11
Marketperform
13/10/2
BUY
110,000
13/10/23
BUY
130,000
14/1/10
BUY
120,000
14/1/24
BUY
105,000
80,000
Ԩ
Ԩ
 Daelim Industrial: Hyundai Securities issued equity-linked warrants (ELWs) and served as a liquidity provider (LP). Hyundai Securities has not disclosed the material contained in this report to any institutional investor or
third party prior to its publication. The author(s) confirms that the material contained herein correctly represents his/her/their opinion and that it has been prepared without any undue influences or interventions.
Hyundai Securities Co., Ltd. or any of its affiliates has not taken part in public offerings of the company(ies) covered in this report for the past 12 months. The author(s) of this report does not have any interest in the
company(ies) covered herein.
 Rating: Sector: Overweight (+10% or more), Neutral (-10 - +10%), Underweight (-10% or more)
Company: Strong BUY (+30% or more), BUY (+10 - +30%), Marketperform (-10 - +10%), Underperform (-10% or more)
Strong BUY = 4, BUY = 3, Marketperform = 2, Underperform = 1, Blackout/Universe Exclusion = 0 (Share price -, Fair value , Rating -)
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information and data obtained from sources we consider reliable. However, we do not guarantee that the information and data are accurate or complete, and, therefore, this report is subject to change without prior
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