Doosan Target Price Raised to KRW 930,000

Doosan, The Prelude to a Second Re-rating: Target Price Raised to KRW 930,000

Introduction: Re-evaluating Holding Companies, Doosan's New Leap Forward

The re-evaluation of holding companies has recently been active in the Korean stock market. In this trend, Doosan (000150) is showing signs of a second re-rating, driven by the solid growth of its subsidiaries and improved performance of its own businesses. DS Investment & Securities has significantly raised Doosan's target price from the previous KRW 580,000 to KRW 930,000, suggesting a high upside potential of 63.2% compared to the current stock price. This blog post aims to deeply analyze the background of Doosan's target price increase, the growth drivers of its core business segments, and propose investment strategies.

Key Factors for Doosan's Target Price Increase: Value Shining Even with Conservative Discount Rates

DS Investment & Securities applied conservative discount rates when calculating Doosan's target price, yet still presented a high target price. This is based on the judgment that Doosan's intrinsic value is currently absolutely undervalued in the market.

• 70% Discount Rate Applied to Subsidiary Equity Value: A 70% discount rate was applied to the equity value of key subsidiaries such as Doosan Enerbility and Doosan Robotics. This is a more conservative figure than the 60% discount rate uniformly applied to other holding companies in their universe. If a 60% discount rate were applied, the target price would exceed KRW 1,000,000.
• 10% Premium on Electronics BG Target Multiple: For Doosan's core internal business, Electronics BG (Business Group), a 10% premium was applied to its Target Multiple compared to its competitor EMC. This reflects the excellent performance and growth potential of the Electronics BG.

Term Explanation:

• Re-rating: A phenomenon where a company's valuation metrics, such as the Price-to-Earnings Ratio (PER), are adjusted upwards due to improvements in the company's performance, growth, or changes in market perception.
• Discount Rate: A rate applied to the equity value of subsidiaries when valuing a holding company. Even if a holding company owns 100% of its subsidiaries, a holding company discount often occurs in the market, reflecting the complex governance structure or investment uncertainties of the holding company.
• Target Multiple: A multiplier used to calculate a target stock price by applying it to a company's future earnings or revenue. For example, a PER of 20x means that the stock price could be valued at 20 times its earnings per share.

Continued High Growth of Electronics BG: Q2 Earnings Surprise and Future Outlook

Doosan's Electronics BG is the biggest driver behind this target price increase. Its Q2 performance was a surprise, exceeding market expectations, and its future growth trajectory remains highly positive.

• Q2 Electronics BG Revenue Estimated at KRW 476.2 Billion (+18.2% QoQ), OPM 28.6%: This performance surpassed DS Investment & Securities' estimate of KRW 460 billion. The Operating Profit Margin (OPM) was 28.6%, an increase of 17.3% compared to the previous quarter. This indicates a significant increase in volume despite the depreciation of the Korean Won.
• High Growth in Sales to N-Company: Notably, sales to N-Company amounted to KRW 180 billion, an increase of 12.5% QoQ, and the operating profit margin for these products is estimated to exceed 50%. This demonstrates that the expansion of high-value-added products is significantly contributing to profitability improvement.
• No Change in Front-End Customer in Q3: While specific guidance for Q3 was not provided, the company stated that no changes in front-end customers were detected. With the confirmed launch of Ultra by year-end, shipments of GB300 (Ultra)-bound CCL (Copper Clad Laminate) are expected from mid-Q3. Additionally, Switch Trays are also undergoing mass production qualification.

Term Explanation:

• QoQ (Quarter-on-Quarter): Refers to the growth rate compared to the previous quarter.
• OPM (Operating Profit Margin): The ratio of operating profit to revenue, indicating the profitability of a company's core business activities.
• CCL (Copper Clad Laminate): A core material for Printed Circuit Boards (PCBs), made by combining copper foil with insulating materials (resin, glass fiber). It is essential for high-performance semiconductors and communication equipment.
• GB300 (Ultra): Believed to be NVIDIA's next-generation Artificial Intelligence (AI) chipset, expected to drive demand for high-specification CCL required for high-performance computing environments.
• Mass Production Qualification: The process of verifying that a product meets the quality standards suitable for mass production.

Future Growth Drivers: Expanding ASIC Customers and Potential Entry into Rubin

The growth momentum of Doosan's Electronics BG is not expected to stop here.

• Expansion of ASIC Customers: One ASIC (Application-Specific Integrated Circuit) customer is awaiting orders, and an additional major US tech company is in the material and mass production qualification preparation stage. Mass production is estimated to begin as early as the first half of 2026.
• 2025 Revenue Upward Revision: Assuming the launch of GB300 within the year, 2025 revenue is projected to reach up to KRW 1.8 trillion. This is an 11.0% upward revision from the previous estimate of KRW 1.6 trillion.
• High Probability of Entry into Next-Generation Model 'Rubin': Based on these references, there is a very high possibility of entering NVIDIA's next-generation model, Rubin.
• Denial of Treasury Stock Sale and Fundraising: Rumors regarding a potential sale of treasury stock and fundraising were explicitly denied during the recent conference call. This is expected to resolve uncertainties and positively impact corporate value.

Term Explanation:

• ASIC (Application-Specific Integrated Circuit): A semiconductor chip custom-designed for a specific purpose. It is optimized for particular fields such as AI and high-performance computing, maximizing efficiency.
• Rubin: A model included in NVIDIA's next-generation AI chipset roadmap, expected to handle high-performance computing demand after GB300.

Investment Areas and Strategy Suggestions

Doosan is an attractive investment target with solid internal businesses and high-growth subsidiaries. In particular, the growth potential of its Electronics BG related to AI semiconductors is noteworthy.

1. AI Semiconductor Materials and Components Sector:

Doosan's Electronics BG possesses unparalleled technological capabilities in the CCL sector, a core material for AI accelerator PCBs. With the explosive growth of the AI market, demand for high-performance CCL will continue to increase, which will be a key growth driver for Doosan.

• Strategy: Focus on the growth potential of Doosan's Electronics BG, which can directly benefit from the expansion of the AI semiconductor industry, and continuously monitor related technology development and customer expansion.

2. Holding Company Investment Strategy:

The value of a holding company fluctuates with the value of its subsidiaries. In Doosan's case, in addition to listed subsidiaries like Doosan Enerbility and Doosan Robotics, unlisted subsidiaries such as Doosan Mobility Innovation and Doosan Logistics Solutions also have high growth potential.

• Strategy: It is necessary to consider the individual growth stories of subsidiaries comprehensively, along with the trend of decreasing holding company discounts. Particular attention should be paid to value changes in new growth engine subsidiaries like Doosan Robotics.

3. Long-Term Investment Perspective:

Doosan should be evaluated as a company possessing core technologies in future industries such as AI, robotics, and energy, from a medium to long-term perspective rather than short-term performance fluctuations.

• Strategy: Instead of being swayed by temporary market fluctuations, a strategy of consistent investment, trusting Doosan's long-term growth vision and business portfolio diversification strategy, is effective.

Conclusion: Doosan Enters a Period of Re-evaluation

Doosan is opening the prelude to a second re-rating based on the overwhelming performance growth of its Electronics BG and its solid position in the AI semiconductor market. The fact that a target price of KRW 930,000 has been presented even from a conservative perspective suggests that Doosan's intrinsic value is not fully reflected in the current market. It is necessary to maintain a positive investment outlook for Doosan, which is securing future growth engines and pursuing continuous innovation.

Investment Disclaimer:

This blog post is for informational purposes only, based on research materials from DS Investment & Securities, and does not constitute a recommendation to buy or sell specific investment products. All investment decisions must be made at the investor's own discretion and responsibility, and any losses resulting from investment outcomes are borne by the investor. The information contained herein reflects market conditions and the author's views at the time of publication and does not guarantee future performance. Investors should always acquire sufficient information and seek professional advice before making investment decisions.