Simtek, Package Substrate Boom... Expecting External Growth Until 2022

Hana Financial Investment Report, Target Price Up 33%
Q2 Operating Profit 19.6 Billion KRW... Turned to Profit Year-on-Year

[Asia Economy Reporter Minji Lee] Shimtek's operating profit is expected to increase significantly due to the boom in package substrates. According to Hana Financial Investment on the 19th, Shimtek's sales in the second quarter are expected to reach 300.2 billion KRW, and operating profit 19.6 billion KRW, up 3% and 44% respectively from the previous quarter.

Module printed circuit boards (PCBs) are estimated to have contributed significantly to profitability by achieving sales exceeding expectations, driven by steady demand from servers. Global clients have reduced their dependence on factories in China, and from Shimtek's perspective, the product mix improved as the proportion of relatively high-priced products increased. In package substrates, the multi-chip package (MCP) sector performed well despite the overall sluggishness of smartphones. The BoC sector is also expected to achieve sales exceeding previous forecasts due to the strong performance of graphics DRAM (GDDR6).

The boom in package substrates is expected to further increase Shimtek's operating profit. Operating profit for this year and next year is expected to be revised upward by 11% and 13%, respectively, compared to previous estimates. Until the first half of this year, a turnaround in subsidiary performance is also anticipated due to the reflective benefits of module PCBs and increased GDDR6 volume.

In the second half of the year, the full-scale volume of GDDR6 in preparation for the year-end launch of PS5 and Xbox Series X is expected to have a positive impact on performance. In 2022 and 2023, following this year's trend, the full-scale volume of LPDDR5 and DDR5 is expected to positively affect the price aspect of package substrates. Kim Rokho, a researcher at Hana Financial Investment, explained, "Package substrate companies are expected to have high visibility of external growth until 2022," adding, "As the leading company in package substrates, Shimtek is proving the favorable market conditions through its performance."

He added, "The grounds for global clients reducing their dependence on China are expected to become clearer," and "We present a target stock price of 20,000 KRW, up 33% from the previous target."

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