Strong 2Q earnings: Doosan reported 2Q sales of KRW4.58trn (+8% YoY) and OPof KRW 389bn (+27% YoY), beating consensus by 21.6% while sales fell short by4.2%. This is mainly due to 1) Its core business turnaround attributed to electronics,industrial vehicles and Mottrol business. Parent basis sales rose 14% while OPjumped 51% YoY. 2) Its affiliate Doosan Infracore’s strong 2Q (see: DoosanInfracore: 2Q earnings strong, 3Q looks even better) on the back of heavy equipmentsales in China.    Electronics and Mottrol deliver strong earnings: Electronics business recorded2Q sales of KRW225bn (+15% yoy) and OP of KRW34bn (+52.7% yoy), while topline continued to grow and proportion of high-margin product increased from 54% to60% in 2Q such as OLED materials and FCCL (Flexible Copper Clad Laminate).    Thus, its division OP also improved, to 15.1% from 11.3%. The Mottrol business’ssales and OP were even stronger, jumping by +46.4% and +190.6% yoy respectively.    Strong excavator sales in China market (for reference, the total market volume in 1H2017 was 70,821, +110% yoy) drove its parts business. Also the company gainedMS from 15% in 2Q16 to 19% in 2Q17 as its competitors could not deliver enoughparts to China local-excavator manufacturers.    Bright 2H ahead: Doosan mgmt. guided strong 2H earnings as 1) its core businesswill continue to grow in Electronics and Mottrol businesses. The company alsoexpects KRW900bn worth of fuel cell power new orders in 2H as new government isemphasizing the importance of renewable energy, 2) its affiliates such as DoosanInfracore and Doosan Bobcat (see: Doosan Bobcat: 2Q net profit falls short ofexpectations) should deliver better 2H earnings than 1H2017 because the Chinaconstruction equipment market continues to grow. On its earnings conference call,Doosan Infracore mgmt. raised their internal guidance of total market size ofexcavators in China from 100K to 110K in 2017.    We maintain Buy rating and raise our TP from KRW132k to KRW145k: The maindrivers to our higher SOTP-derived TP are 1) we change our EBITDA forecast by9.5% deriving new core value of KRW2.17trn with unchanged target EV/EBITDAmultiple of 5.6x, 2) the company’s net debt also dropped from KRW1,132bn toKRW960bn due to improving cash from the strong core business. We rate the sharesBuy as we expect continued strong earnings.

声明：如本站内容不慎侵犯了您的权益，请联系邮箱：wangshiyuan@epins.cn 我们将迅速删除。