[Click eStock] Silicon Works, Correction Presents Reentry Opportunity... Target Price Up 33%

[Asia Economy Reporter Lee Seon-ae] Hana Financial Investment announced on the 28th that although a short-term price correction is inevitable for Silicon Works, the industry is in a definite upcycle, and the target price has been raised by 33% from the previous 64,000 KRW to 85,000 KRW.

Considering the Q4 earnings shock and recent sharp rise in stock price, a correction phase seems unavoidable for the time being, but this correction is expected to provide a re-entry opportunity. Given the strong set demand, increased demand for high-end panels, DDI supply shortage caused by foundry supply shortage, rising DDI prices, and the start of a shipment increase cycle for POLED panels by LG Display and BOE, a valuation rerating for DDI companies is deemed possible.

Competitor Novatek has already reflected this, with the average annual price-to-earnings ratio (PER) steadily rerating from 11 times in 2016, 14 times in 2017, 16 times in 2018, 17 times in 2019, to 21 times in 2020. Silicon Works' historical average PER is around 14 times, and the current stock price is at a PER of 13 times based on 2021 earnings.

Kim Hyun-soo, a researcher at Hana Financial Investment, explained, "Considering the above industry conditions, we applied a rerating multiple of 16 times to raise the target price. Although there is a possibility of a short-term price correction due to concerns over foundry cost increases and a decline in LG Display's mobile OLED utilization rate in the first half of the year, we believe that any correction will present a strong buying opportunity."

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