[Click eStock] Deoksan Neolux, the Biggest Beneficiary of OLED Utilization Rate Increase

Yuanta Securities Report, Positive on OLED Investment Expansion
Expected Operating Profit This Year 30 Billion KRW, Up 44% YoY

[Asia Economy Reporter Minji Lee] Yuanta Securities maintained a buy rating and a target price of 40,000 KRW for Duksan Neolux on the 17th, expecting the company's best performance this year based on the rise in OLED utilization rates.

In the second quarter, Duksan Neolux is estimated to record sales of 24 billion KRW and operating profit of 5 billion KRW, down 24% and 20% respectively from the previous quarter. Kwangjin Kim, a researcher at Yuanta Securities, said, "Quarterly decline is inevitable due to the seasonal low demand for smartphones and demand contraction caused by the spread of COVID-19," adding, "Although there were concerns about order reductions due to inventory accumulation of OLED materials by Chinese clients in the first quarter, the inventory depletion rate is faster than expected, so the decline will not be significant."

Sales for this year are expected to reach 124.1 billion KRW, and operating profit 30 billion KRW, up 27% and 44% respectively compared to the same period last year. With the launch of multiple new flagship models such as the Galaxy Note 20 series starting in the second half, followed by the Galaxy Fold 2 and iPhone 12 series, significant growth in performance is anticipated.

Researcher Kim said, "Reflecting the replacement demand that was suppressed due to COVID-19, Samsung Display's utilization rate is expected to rise to a high level," and added, "There is also a high possibility of reversal of the inventory valuation loss (3.3 billion KRW) recorded in the first quarter."

Attention should also be paid to the potential sales expansion of Chinese companies. Sales to Chinese clients such as BOE, CSOT, and Tianma are expected to grow from 14 billion KRW in 2018, 20 billion KRW in 2019, to 27 billion KRW this year. Supply of materials to BOE, which is highly likely to enter one model of the Galaxy S series and one model of the iPhone 13 series next year, is expected to expand. As BOE aggressively increases penetration rates and significantly raises the utilization rates of the B7 and B11 fabs by the end of the year, maintaining high levels from next year, the supply volume of materials from Duksan Neolux is also expected to increase substantially.

Researcher Kim explained, "Despite the impact of COVID-19, record-high performance is expected this year," and added, "Considering Samsung Display's shutdown of LCD lines and focus on OLED business in the mid-to-long term, as well as the trend of Chinese panel companies expanding investment in flexible OLEDs, the share of OLED in the global panel market will increase further."

This content was produced with the assistance of AI translation services.