Hana Securities said on the 3rd that RF Materials is expected to continue posting positive revenue results as artificial intelligence (AI) server traffic surges. It maintained a "Buy (BUY)" rating and raised its target price to 120,000 won from 80,000 won. RF Materials' previous trading day closing price was 68,900 won.
Kim Hong-sik, an analyst at Hana Securities, said of RF Materials, "As demand shifts from optical to radio frequency (RF), the share price will keep rising."
First, Kim viewed the revenue outlook for RF Materials positively on the back of rising demand for optical modules.
Kim said, "Market interest in optical communications has been red-hot lately," adding, "Thanks to AI server optical modules, RF Materials swung to an operating profit last year and posted record results."
Kim added, "With AI server traffic surging, revenue from pump lasers at optical communications components company Lumentum is expected to underpin the downside in results through next year." RF Materials currently supplies pump laser packages to Lumentum.
Kim analyzed that RF Materials will benefit going forward from increasing demand for RF modules.
Kim said, "It is also necessary to pay attention to the supply of RF modules following optics," explaining, "Because the network that connects servers to base stations is one body, if servers advance with CPO (co-packaged optics), the front line must secure large-scale spectrum and link it with base station capital expenditures."
Kim viewed market conditions as favorable for RF Materials.
Kim explained, "In the United States, authorities are already pushing the largest-ever spectrum auction totaling 800 megahertz (MHz)," adding, "AT&T has announced a $250 billion (about 378.125 trillion won) capital expenditure (CAPEX) plan, validating the logic for network investment."
Kim added, "With Chinese equipment being phased out and NXP exiting its communications division, the market environment is being reshaped favorably," noting, "We can expect RF Materials' RF package revenue to increase."