Doosan Bobcat’s profitability will pick up as it streamlines its business structure, said IBK Securities on March 13, maintaining a “buy” recommendation and 48,000 won (US$45.05) target price.
Its stock price has fallen from concerns that its growth might slow down after selling part of its business, but its compact construction equipment sector will be able to grow in size and advance profits, said analyst Lee Sang-hyeon.
Thanks to the boom in housing construction in the US and Europe, markets will steadily expand, and demand for building up inventory in the North American region is increasing as well. Accordingly, Doosan Bobcat’s operating profit will improve and net profit margin will rise following the decline in corporate tax rate in the US, said the analyst.
Restructuring of businesses, in particular, will have positive results, according to Lee who explained that focusing on compact equipment, its most profitable business, by selling its heavy equipment unit to Doosan Infracore and seeking to sell portable power equipment division, will improve its profits.
Meanwhile, as it locally sources raw materials for its steel products in the US, it will hardly be affected by further tariffs on Korean steel, said the analyst.
As for the overhang issue, most of the stake owned by Doosan Infracore and Doosan Engine is offered as collateral for loans, and there will be no additional stocks for trade, he said.
By Hwang You-mee (firstname.lastname@example.org)