Find the Top Beneficiary Stocks in the Memory Semiconductor Investment Cycle

Hanwha Investment & Securities Picks Tes as a Beneficiary Stock... Target Price Upward Revised

[Asia Economy Reporter Lee Seon-ae] An analysis report has emerged stating that TES is the biggest beneficiary stock in the memory investment cycle.

According to Hanwha Investment & Securities on the 15th, TES recorded its highest quarterly performance with Q1 sales of 154.4 billion KRW and operating profit of 33 billion KRW. Sales by segment were 136 billion KRW for new equipment and 18 billion KRW for parts maintenance, indicating significant new facility investments by major clients.

Samsung Electronics invested in NAND at its Xi'an and Pyeongtaek 2 plants, and is also expanding DRAM at the Pyeongtaek 2 plant. SK Hynix is mostly converting existing factory equipment to 128-layer NAND, while DRAM investments appear to be proceeding with process conversion at Wuxi and new investments at M16 simultaneously. Profitability improved due to the surge in sales, but R&D expenses for new equipment were reflected, resulting in an operating margin of 21.4%.

Following the Q1 earnings announcement, TES's full-year performance is expected to be revised upward. Researcher Lee Soon-hak of Hanwha Investment & Securities said, "Initially, we expected client investments to be concentrated in the first half and significantly decrease in the second half, but the Q1 earnings announcement showed an upward revision in bit growth (production increase rate converted to bit units) and a significant drop in inventory levels, indicating movements toward additional expansions." He added, "Accordingly, some expansions will be reflected in Q4, contributing to TES's performance. We forecast TES's full-year sales at 369.5 billion KRW and operating profit at 65.9 billion KRW, which are upward revisions of 27% and 17%, respectively, compared to previous estimates."

Furthermore, it is expected that the memory investment cycle of client companies will not be a one-time event. He stated, "The memory investment cycle of clients is expected to continue until next year, and benefits from expanded foundry investments can also be anticipated. TES is awaiting approval for GPE equipment for foundry use and may receive orders as early as this year, which could lead to performance upside and valuation rerating."

Hanwha Investment & Securities maintains a 'Buy' rating on TES and has raised the target price by 25% from 33,000 KRW to 41,000 KRW.

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