NH Investment & Securities on the 2nd said Daeduck Electronics is likely to see growing trickle-down effects from global semiconductor substrate capacity expansions. It kept a "Buy" rating and raised the target price to 210,000 won from 180,000 won. The previous session's closing price was 154,400 won.
Hwang Ji-hyeon, an analyst at NH Investment & Securities, said, "Although Daeduck Electronics' share price has fallen about 20% from its peak due to recent flows concentrating on large-cap semiconductor stocks, the fundamentals are instead improving."
Hwang projected that Daeduck Electronics will post strong results on the back of operating leverage from higher utilization and an improved product mix.
Hwang analyzed, "As global substrate makers focus on expanding ABF (FC-BGA) substrates, their capacity to invest in BT (FC-CSP, CSP, etc.) substrates is limited," adding, "The supply-demand environment for BT substrate makers is turning favorable, and the trickle-down effects Daeduck Electronics will enjoy are set to strengthen."
NH Investment & Securities projected that on a consolidation basis in the second quarter this year, Daeduck Electronics will post sales of 379.5 billion won and operating profit of 65.6 billion won. Compared with a year earlier, sales would rise 54.4% and operating profit 3,417%, an earnings surprise above the market consensus (operating profit of 59.3 billion won).
Hwang said, "With solid demand across all product lines, operating-profit leverage is kicking in as utilization approaches full capa (full capacity)."
Hwang also expected the momentum for upward earnings revisions to continue in the second half. The reason, Hwang said, is that the impact from expanding multilayer printed circuit boards (MLB) is set to be fully reflected in results starting in the third quarter.
Hwang explained, "Server-grade FC-BGA substrates, which will greatly contribute to mix improvement, began mass production in June, and additional products are slated for mass production in the second half," adding, "Following a price hike reflected in the first half, strong demand leaves a high possibility of additional price hikes in the second half, mainly for non-memory substrates."