[Click eStock] "DB HiTek to Continue Record-Breaking Performance Next Year"

Shinhan Financial Investment Report
"Non-memory Supply Shortage to Continue Next Year"

[Asia Economy Reporter Minji Lee] Shinhan Financial Investment maintained its buy rating and target price of 80,000 KRW for DB HiTek on the 20th. This is based on the expectation of significant performance improvement next year due to increased production volume and price hikes.

In the second quarter, DB HiTek is expected to record sales of 274.7 billion KRW and operating profit of 81.4 billion KRW, up 12.7% and 34.3% respectively from the previous quarter. This is estimated to be influenced by capacity expansion and a 6% price increase effect.

In the third quarter, sales are projected to reach 302.7 billion KRW and operating profit 97.9 billion KRW, increasing by 10.2% and 20.3% compared to the same period last year, setting a new record high. The exchange rate is assumed to be 1,140 KRW for estimation. Do-yeon Choi, a researcher at Shinhan Financial Investment, said, “There is a very high possibility of performance upside depending on prices, shipment volume, and exchange rates,” adding, “This will be the first quarter to achieve sales of 300 billion KRW, and operating profit could also reach 100 billion KRW.”

It is expected to continue its record-breaking quarterly and annual performance next year as well. This is because the non-memory supply shortage is not expected to be fully resolved until 2022. Downstream companies are currently engaged in a battle to proactively secure 8-inch foundry volumes. Researcher Choi explained, “The 8-inch foundry price increase is expected to continue until the first half of next year, and DB HiTek’s production volume will increase from about 129K per month in the first quarter of this year to 145K next year,” adding, “Significant performance improvement is expected next year due to price increases and capacity expansion effects.”

This year, sales and operating profit are predicted to reach 1.1147 trillion KRW and 326.4 billion KRW, respectively, marking record highs with increases of 19% and 36% compared to a year ago. Next year, sales are estimated at 1.2243 trillion KRW and operating profit at 404.1 billion KRW, up 9.8% and 23.8%, respectively.

Researcher Choi said, “In 2018, the company could not maintain high profitability continuously even when recording a quarterly operating margin of 25%, but its current strength is completely different from the past,” and analyzed, “The current stock price is only 8.9 times the forward earnings per share (EPS) for next year, and compared to 8-inch competitors (with this year’s PER over 19 times), there is no particular reason for undervaluation.”

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