[Edaily Reporter KIM YOON-JEONG ] Hana Securities assessed that, excluding one-time expenses, OE Solutions Co., Ltd.(138080)successfully returned to an operating profit in the second quarter, and that a performance turnaround is becoming visible based on the in-house production of core components and its artificial intelligence radio access network (AI-RAN) business. The firm maintained its “Buy” investment rating and a target price of 60,000 won.

According to an analysis by Kim Hong-sik, an analyst at Hana Securities, on the 20th, OE Solutions Co., Ltd.’s second-quarter revenue reached 19.7 billion won, up 23% year-over-year and 9% quarter-over-quarter. While the company posted an operating loss of 900 million won, it actually recorded a profit when excluding a 1.5 billion won loss from the write-off of inventory assets.
Analyst Kim stated, “Excluding the 1.5 billion won loss from inventory write-offs, the company has effectively returned to operating profitability for the first time in 19 quarters,” adding, “Given the factors mentioned above, the likelihood of returning to profitability in the second half of the year has definitely increased.”
The company’s order backlog doubled to 40 billion won from 20 billion won, and a reversal of inventory valuation provisions was recorded at around 1 billion won. Hana Securities assessed that the likelihood of additional losses due to product obsolescence is low going forward.
The internalization of LD chips—a key raw material—also contributed to the improvement in profitability. The gross profit margin for the second quarter stood at 20%, and the share of LD chips in total raw material purchases for the first half of the year fell to 24%, the lowest level in the past decade.
Analyst Kim noted, “We estimate that reliance on external sources has decreased as in-house production has expanded not only for exports to Japan but also for the domestic market,” adding, “Given that the in-house production rate for core components is improving, we expect a significant improvement in profit margins should domestic sales surge through AI-RAN in the future.”
AI-RAN was identified as the key driver of a future earnings turnaround. Hana Securities projected that OE Solutions Co., Ltd., which holds a high market share in the domestic wireless optical transceiver market, will benefit from expanding demand as the Ministry of Science and ICT carries out its AI-RAN flagship project over two years.
Analyst Kim stated, “Considering the AI-RAN flagship project led by the Ministry of Science and ICT, large-scale orders are expected by the end of next year at the latest.”
The recent stock price rebound was interpreted as an early reflection of expectations for AI-RAN-related benefits. While other domestic optical transceiver companies have seen relatively lackluster stock price rebounds, OE Solutions Co., Ltd.’s stock price has doubled from its low point.
Analyst Kim noted, “The market has essentially interpreted this Ministry of Science and ICT demonstration project as a sign that OE Solutions Co., Ltd.’s domestic sales are set to recover,” adding, “Recalling that the stock price surged fivefold from its low point several months ahead of OE Solutions Co., Ltd.’s previous earnings turnaround, we believe this market reaction should be viewed as a strong buy signal.”