The author is an analyst of NH Investment & Securities. He can be reached at  esshim@nhqv.com. -- Ed.

Tovis manufactures industrial monitors and TFT-LCD modules. Moving ahead, we continue to expect high earnings growth, thanks to both a likely recovery in orders from casinos (in line with endemic status for Covid-19) and capacity expansion at the firm’s automotive display business. 2Q22 review: External environment still rocky Tovis reported sluggish 2Q22 results, posting consolidated sales of W67.2bn (+27.2% y-y, -15.5% q-q) and OP of W1.2bn (RR y-y, TTL q-q). Although Tovis’s sales of industrial monitors upped 22.5% y-y to W37.9bn alongside an ongoing recovery in the casino industry, they fell 14.5% q-q due to deferred sales. The firm’s LCD module sales declined 22.6% q-q amid continued auto chip supply issues. Earnings to rise from 3Q22 on industrial monitor sales recovery and better external environment At Tovis’s industrial monitor business, sales were slow in 2Q22, but production hit a new quarterly high for the firm at 64,700mn units, the fruits of which should come to be reflected in 2H22 earnings. With the company having a high export portion, its total sales benefited from favorable forex market conditions. With the external business environment for the firm strengthening gradually, we expect to see earnings growth in 2H22. COGS-to-sales ratio should improve on the reflection of both a decrease in panel prices and normalization of maritime freight costs. In addition, earnings at the automotive display division should rise steadily going forward in line with the dissipating of auto chip supply issues. Despite Tovis’s disappointing 2Q22 results, we believe that it would be premature to cut our earnings forecasts, especially given that external environment uncertainties are now fading gradually. We have upbeat earnings expectations for 2023, as: 1) the automotive display division is to start generating earnings in earnest from next year; and 2) domestic capacity expansion effects are to be fully reflected from 2024. Also boding well, synergies between newly-acquired Seil Hi-Tech (industrial filmmaker) and Tovis’s existing businesses should emerge bit by bit going forward.