Deoksan Neolux, Accumulation Effective Targeting Post-Q2

[Asia Economy Reporter Oh Ju-yeon] NH Investment & Securities forecasted that a decline in Duksan Neolux's earnings for the second quarter of this year is inevitable. However, considering the demand and supply factors of OLED, they maintained a 'Buy' investment rating and a target price of 40,000 KRW, expecting significant performance improvement in the second half of the year.

Researcher Ko Jung-woo evaluated, "Duksan Neolux's first-quarter sales were 31.8 billion KRW, and operating profit was 6.9 billion KRW, increasing by 64% and 220% respectively compared to the same period last year, slightly exceeding market expectations." However, he analyzed that the second-quarter OLED material shipments are expected to decrease due to poor facility utilization rates of domestic panel customers and reduced OLED material orders from Chinese panel customers, which could lead to a decline in second-quarter earnings.

Researcher Ko expressed optimism, stating, "However, it is expected that OLED material volume growth can be actively pursued in the second half of the year."

He explained, "On the demand side, this is due to the effects of new smartphone launches by major companies including Samsung Electronics and Apple, and on the supply side, it is due to anticipated improvements in facility utilization rates of panel customers."

Researcher Ko estimated, "The scale of earnings in the second half of the year is expected to increase by 26% in sales and 47% in operating profit compared to the first half," adding, "If additional developments such as BOE's supply of panels for Apple and Samsung Display's pilot line operation for QD displays are detected, it could provide a basis for further upward revision of second-half earnings."

He continued, "Considering the status of domestic and international panel customers and the influence of OLED materials, the company is expected to stand out as a firm with significant structural growth potential within the display sector," and added, "Competitiveness can also be confirmed through higher-than-average R&D investment in the display industry (exceeding 10% of sales) and an increase in patents (807 in 2017 → 962 in 2018 → 1,133 in 2019)."

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