DS Investment & Securities said on the 30th that CMTX is expected to benefit from improved earnings over the next two years on the back of the semiconductor corporations cycle. It initiated coverage with a Buy rating and a target price of 200,000 won. CMTX's closing price in the previous trading day was 145,500 won.
CMTX is known as an official partner of TSMC and manufactures silicon parts for semiconductor etching processes.
DS Investment & Securities analyzed that, in line with the capital expenditure stance of semiconductor corporations such as TSMC over the next two years, CMTX, a parts manufacturer, will also benefit from improved results.
Researcher Lee Surim at DS Investment & Securities said, "Major chipmakers are pursuing new fab (factory) investments alongside conversion investments for existing lines," adding, "This simultaneously stimulates before market demand from new equipment introductions and after-market demand that arises during process conversions."
She added, "In particular, Si (silicon for semiconductor etching processes) and SiC (silicon carbide) parts have a structure in which repeated replacement demand occurs within core processes such as etching and deposition," and "an expansion of conversion investment can lead to greater parts-demand elasticity than an increase in capital expenditures (CAPEX)."
Lee said expectations are high for future results to improve, noting that CMTX has met TSMC's quality standards through strong technology and entered the front-end and mid-end process areas.
Lee said, "By entering the front-end and mid-end processes that existing aftermarket players had not been able to penetrate, the company improved its product mix and expanded its total addressable market (TAM)," adding, "These processes are core areas where fine particles (particles) and process uniformity determine the Production yield, and they had previously been monopolized by original equipment manufacturer (OEM) corporations."
She explained, "CMTX has entered these processes by meeting TSMC-level quality standards," and "it is contributing to customers' Production yield improvement by enhancing particle control and process stability."
Another growth driver is that it counts major semiconductor corporations, including TSMC and Samsung Electronics, as customers.
Lee said, "CMTX has TSMC, Samsung Electronics and Micron all as customers, so the sales-boost effect backed by Chonbang investment is projected to be the largest within the value chain," adding that an increase in volumes from Samsung Electronics' NAND V8 transition is particularly expected.
The achievement of technology internalization is another factor raising expectations for results.
Lee evaluated, "CMTX can maintain structurally high profitability through material internalization via its subsidiary Celliq," adding, "Vertical integration of materials, processes and products has built earnings power beyond that of a simple machining shop."