Hana Securities said on the 3rd that RF Materials is likely to continue posting positive revenue results as traffic for artificial intelligence (AI) servers surges. It kept its "buy (BUY)" rating and raised its target price to 120,000 won from 80,000 won. RF Materials' closing price in the previous session was 68,900 won.
Kim Hong-sik, a Hana Securities analyst, said of RF Materials, "As demand shifts from optical to radio frequency (RF), the stock will keep rising."
First, Kim assessed RF Materials' revenue outlook positively on the back of rising demand for optical modules.
Kim said, "Market interest in optical communications has been intense recently," adding, "Thanks to AI server optical modules, RF Materials' operating profit swung to a surplus last year, marking a record performance."
Kim added, "With AI server traffic surging, sales of pump lasers at Lumentum, an optical communications components firm, are expected to support the downside through next year." RF Materials supplies pump laser packages to Lumentum.
Kim analyzed that going forward, RF Materials will benefit from rising demand for RF modules.
Kim said, "In addition to optics, attention should be paid to RF module supply," explaining, "Because the network linking servers to base stations is one body, if servers advance with CPO (co-packaged optics), the front line must secure large-scale spectrum and base station capital expenditures must follow."
Kim also assessed the market backdrop as favorable for RF Materials.
He said, "The United States is already pushing a record spectrum auction totaling 800 megahertz (MHz)," adding, "AT&T has announced a $250 billion capital expenditure (CAPEX) plan, validating the case for network investment."
Kim added, "With Chinese equipment being phased out and NXP, a Dutch semiconductor company, also exiting the communications division, the market environment is being reshaped favorably," and said, "We can envision RF Materials' RF package sales increasing."